Get Paid to Buy the Stocks You Already Want

The Yield You Command

You can generate income from your intention to purchase a stock. This is a fundamental principle of modern options trading, turning a passive desire into an active, revenue-generating operation. The mechanism for this is the cash-secured put, a strategy that pays you a premium for your willingness to buy a specific stock at a predetermined price. It is a direct expression of your market view, where you define the terms of your potential purchase and receive immediate compensation for that commitment.

The process begins when you identify a company whose shares you want to own for the long term, but at a price below its current market value. Instead of placing a passive limit order and waiting, you take a proactive stance. You sell a put option contract to another market participant. This contract gives the buyer the right, but not the obligation, to sell you 100 shares of the underlying stock at a specific price, known as the strike price, on or before a set expiration date.

For granting them this right, you receive an upfront, non-refundable payment called the premium. The cash you hold in reserve to purchase the stock if the option is exercised secures the position, making it a defined-risk engagement.

This transaction redefines your position in the market. You are now being paid for your patience. Two primary outcomes can unfold. If the stock’s price remains above your chosen strike price through the option’s expiration, the contract expires worthless.

The buyer has no incentive to sell you the stock at a price lower than the open market. You then retain the full premium as pure profit, and your obligation to purchase the shares dissolves. Your capital is freed, and you are positioned to repeat the process.

The second outcome occurs if the stock price falls below your strike price by expiration. The buyer will likely exercise their right to sell you the shares at the agreed-upon strike price. This is known as assignment. You fulfill your end of the contract by purchasing the 100 shares per contract sold, using the cash you had set aside.

The premium you collected at the start of the trade acts as a direct discount on your purchase, lowering your effective cost basis for acquiring a stock you already identified as a desirable long-term holding. You now own the asset at the price you wanted, with an additional financial benefit.

The Machinery of Proactive Acquisition

Deploying the cash-secured put strategy requires a systematic approach, transforming a theoretical concept into a repeatable, results-oriented process. Success is engineered through deliberate choices regarding the underlying asset, the contract’s parameters, and the execution of the trade itself. This is where the aspirational goal of getting paid to buy stocks meets the practical discipline of portfolio management. Every decision contributes to the risk-return profile of the position, aligning your market outlook with a tangible financial outcome.

Selecting Your Targets

The foundation of a successful cash-secured put strategy rests upon the quality of the underlying company. This method is primarily a tool for acquiring ownership in businesses you believe in for the long term. The premium income is a secondary benefit to the primary goal of potentially owning a great company at a great price. Therefore, the selection process must be rigorous and rooted in fundamental analysis.

Your focus should be on high-quality, blue-chip stocks or well-established exchange-traded funds (ETFs). These are typically entities with a history of stable earnings, strong balance sheets, and a defensible market position. A company’s resilience is a key factor, as the strategy requires you to be comfortable holding the stock through various market cycles should you be assigned. Volatile, speculative stocks introduce a level of price risk that can undermine the strategy’s core purpose, which is disciplined acquisition and income generation.

A cash-secured put is a straightforward options trading strategy where the investor sells a put option contract while simultaneously setting aside enough cash to cover the potential purchase of the underlying asset at the strike price.

A structured selection process will yield the best candidates. You are building a watchlist of potential long-term holdings before you even consider an options contract. This list is the source from which all subsequent trading decisions will flow. The discipline to stick to this pre-vetted list is what separates a strategic investor from a reactive trader.

• Business Model Clarity ▴ Choose companies whose operations you understand. A clear view of how the business generates revenue and maintains its competitive advantage gives you the conviction to hold the stock if assigned during a market downturn.
• Financial Stability ▴ Analyze the company’s balance sheet for manageable debt levels and a consistent history of positive cash flow. Profitability and a solid financial footing suggest the company can weather economic headwinds, protecting your investment’s long-term value.
• Consistent Dividend History ▴ While not mandatory, a history of paying and growing dividends is often a sign of a mature, stable company. If you are assigned the shares, these dividend payments can provide an additional income stream on top of any potential covered call premiums.
• Sufficient Liquidity ▴ Focus on stocks and options that have high trading volumes. High liquidity, indicated by a narrow bid-ask spread, ensures you can enter and exit your positions efficiently and at fair prices. This is critical for managing the trade effectively.

Calibrating the Contract

Once you have identified a suitable stock, the next phase involves selecting the specific options contract that aligns with your risk tolerance and investment objectives. This is a balancing act between generating a meaningful premium and defining a purchase price you are genuinely comfortable with. The two key levers you control are the strike price and the expiration date.

Defining Your Purchase Price the Strike

The strike price is the price at which you are obligated to buy the stock if the option is assigned. Selecting an out-of-the-money (OTM) strike price, meaning a strike below the current stock price, is standard practice for this strategy. This choice creates a buffer, allowing the stock to fall a certain amount before your purchase obligation becomes a reality. The further out-of-the-money you go, the lower the probability of assignment, but the smaller the premium you will receive.

A key metric to guide this decision is the option’s delta. Delta, one of the “Greeks” of options pricing, measures the option’s sensitivity to a $1 change in the underlying stock’s price. It also serves as a rough proxy for the probability of the option expiring in-the-money.

For example, a put option with a delta of 0.30 suggests there is an approximate 30% chance of the stock price finishing below that strike by expiration. Many practitioners favor selling puts with a delta between 0.20 and 0.30, as this range typically offers a respectable premium while maintaining a high probability of the option expiring worthless.

Setting the Time Horizon the Expiration

The expiration date determines the lifespan of the contract. Selecting an expiration date that is 30 to 45 days in the future is a common approach. This timeframe is often considered the “sweet spot” for options sellers due to the behavior of time decay, or theta. Theta measures the rate at which an option’s value erodes as time passes.

This decay accelerates significantly in the last 30-45 days of an option’s life, which benefits you as the seller. You want the option’s value to decline to zero.

Selling options with shorter expirations, such as weeklys, will generate more frequent income but requires more active management. Longer-dated options, beyond 60 days, will offer larger premiums upfront but are more sensitive to changes in the stock’s price and tie up your capital for an extended period. The 30-45 day window provides a balanced approach, allowing for meaningful time decay to work in your favor without exposing you to prolonged market risk.

The Execution Process

With your target stock and contract parameters chosen, the final step is to execute the trade. This involves a “Sell to Open” order for the specific put option you have selected. Your brokerage platform will require that you have sufficient cash in your account to cover the full cost of purchasing the shares if assigned.

For example, to sell one put contract with a $90 strike price, you must have $9,000 in cash reserved in your account (1 contract x 100 shares/contract x $90/share). This cash collateralizes the position.

Upon execution, the premium is immediately credited to your account. This is your income, earned at the very start of the trade. The position is now active, and your capital is working. The process is one of precision and intention, turning your market viewpoint into an immediate, tangible result.

Mastering the Strategic Horizon

Successfully executing a single cash-secured put is the first step. True mastery comes from understanding how to manage positions through changing market conditions and how to integrate this strategy into a broader, more dynamic portfolio system. This is about moving from a single trade to a continuous cycle of income generation and strategic asset acquisition. Advanced applications provide you with a framework for responding to any market outcome, turning potential challenges into new opportunities for profit.

Navigating Market Fluctuations

The market is in constant motion, and the price of your underlying stock will inevitably move after you’ve sold a put. Your ability to manage the position proactively is what elevates this from a passive bet to a dynamic strategy. If the stock price rises or moves sideways, the trade is progressing as planned. The primary management decision here is when to take profits.

Many experienced traders choose to buy back the put option to close the position once they have captured 50-60% of the initial premium. This locks in a profit, frees up the capital, and allows you to redeploy it into a new opportunity without waiting for the full expiration period.

A more challenging scenario arises if the stock price falls and approaches your strike price. You have several strategic choices. You can, of course, do nothing and allow assignment to occur if the price is below your strike at expiration. This aligns with the strategy’s primary goal of acquiring the stock at your desired price.

A different path involves actively managing the position by “rolling” the option. Rolling consists of buying back your current put option (a “Buy to Close” order) and simultaneously selling a new put option (a “Sell to Open” order) with a later expiration date and, typically, a lower strike price. The goal is to perform this action for a net credit, meaning you collect more premium from the new option than it costs to close the old one. This maneuver effectively gives you more time for the stock price to recover and lowers your potential purchase price, all while generating additional income.

The Assignment and the Wheel

Assignment is a core component of the strategy, not a failure. It is the fulfillment of your stated intention to buy the stock at your chosen price. When you are assigned, you purchase 100 shares of the stock per contract at the strike price.

Your account will be debited the corresponding amount, and the shares will appear in your portfolio. At this point, you are a shareholder in a company you previously identified as a quality, long-term holding.

The premium received from selling the put can be applied to the cost of the shares, ultimately lowering the cost basis of the stock purchase.

This event opens the door to the next phase of a powerful, systematic strategy known as “The Wheel.” With the shares now in your possession, you can begin selling covered calls against them. A covered call is the inverse of a cash-secured put. You sell a call option, which gives a buyer the right to purchase your shares from you at a specified strike price. For this, you again receive a premium.

This transforms your new stock holding from a passive investment into another income-generating asset. If the stock price rises above the call’s strike price, your shares are “called away,” and you realize a profit on the stock sale plus the call premium. If the price stays below the strike, you keep the premium and the shares, and you can sell another covered call. This cyclical process of selling puts to acquire stock and then selling calls against that stock is the essence of The Wheel, a robust system for continuously generating income from your capital and your portfolio holdings.

Your Market View as an Asset

You have now seen the mechanics of a professional-grade investment strategy. The process of selling a cash-secured put transforms your entire relationship with the market. Your desire to own a piece of a company is no longer a passive wish waiting for a market dip. It is an active, tangible force that generates its own yield.

Every decision to engage with this strategy is a declaration of intent, a clear statement of the value you place on an asset and the price at which you are prepared to act. This is the mindset of a capital allocator, not a price taker. The knowledge you have gained is the foundation for a more deliberate, more sophisticated, and more rewarding interaction with the world of finance.