Cash-secured put vs just buying the stock: the real math

You want MSFT. You have two honest ways to get it: pay the ask today, or sell a put at the price you wish it were and get paid to wait. Everyone who sells cash-secured puts has been asked why they don’t just buy the stock — and the answer is not a slogan, it is a payoff table. Here is the whole comparison on one real chain, including the column put sellers prefer not to talk about.

The two trades below use the same snapshot, the same expiry, and the engine’s own probability model. Every figure is reproducible from scripts/blog-numbers.mts, and every position can be opened in the builder exactly as priced.

The two trades, stated

Trade A needs no explanation: $46,472 buys the shares, the dividends, and every dollar of upside from here to wherever. Trade B is the 30-delta put from the strike-selection playbook: $44,000 secures the obligation to buy at $440, and the chain pays $980 for accepting it.

What the put seller actually gets

The headline pair: a 75.9% chance the put expires worthless and the 16.9% annualized just repeats, and a 31.1% chance you are put the shares at an effective $430.20 — a 7.4% discount to today’s price. Assignment is not the bad branch. If you wanted MSFT at $464.72, being handed it at $430.20 is the better entry; the put seller’s actual bad branch is elsewhere in the table below.

The outcome table — every expiry price, both trades

Three regions, three verdicts. Below $440, both trades lose dollar for dollar — the put is not protection, it is the same downside from a lower starting line — and its edge is pinned at exactly $3,452, the discount to spot plus the credit, no matter how far the stock falls. Between the strike and $474.52, the put keeps its full $980 while the shares do worse or barely better. Above $474.52 — today’s spot plus the credit — the shares win, without limit.

So price that crossover instead of arguing about it. The engine puts the odds of MSFT finishing above $474.52 in 48 days at 41.6%. Two times in five, the buyer beats the put seller — and occasionally by a lot, because the buyer’s win column has no ceiling. The put seller wins the other three, always by amounts you can read off this table in advance. That is the entire trade: you are selling the right tail for cash up front.

What the shareholder gets that the put seller doesn’t

• The dividends. At the 1.2% yield the model assumes, 48 days of holding pays about $73 on the 100 shares. Real — but this carry line runs both ways: the put seller’s $44,000 sits in cash for the same 48 days, and at the model’s own 4.2% rate that cash earns about $243 of interest, which the buyer gave up by spending it on shares. Net the two and the carry actually favors the put; neither number is big enough to decide the comparison on its own.
• The long-term clock. The shareholder’s holding period starts today; held past a year, gains go long-term. The put’s premium is short-term income always, and if assigned, the shares’ clock starts only at assignment — the tax mechanics post walks exactly where each dollar lands.
• Certainty of position. The buyer owns the upside from minute one. The put seller owns it 31.1% of the time, at a discount, starting later. If the point of the trade is owning MSFT, a put is a maybe.

Annualized is honest only if you can repeat it

The 16.9% annualized assumes the 48-day cycle re-runs all year at the same credit and the same distance from trouble — and IV decides both. The premium that pays 2.23% static exists because the market prices a 31.1% chance of assignment; sell the same delta in a calmer regime and both the credit and the annualized figure shrink with it. Treat annualized as a comparison tool between two candidate trades on the same day, never as a forecast for the year. The cash-secured put income guide runs this arithmetic across a whole strike ladder, including the tail the annualized number hides.

The same comparison on a quiet stock

Everything above was priced on a 29.5% IV name. Run the identical structure on KO at $87.59 — the 18 Sep $85 put, the same ~30 delta, the same 48 days — and watch every number shrink in proportion:

The KO version: an effective basis of $83.45 if assigned, a 4.7% cushion, 13.9% annualized. Neither put is the better trade; they are the same structure quoted at two volatilities, and the stock-versus-put verdict moves the same way for both. What changes is the size of the right tail you are selling. A quiet dividend stalwart rarely runs away from a put seller, so giving up its upside costs little and the chain pays little for it. A high-IV name runs — which is exactly why the chain pays you $980 to promise not to chase it.

Which trade are you actually making?

1. 1You want the shares, now, for years. Buy the shares. The put’s $980 is not compensation for missing a decade’s compounding, and the long-term tax clock starts today.
2. 2You want the shares, but the price feels rich. Sell the put at the strike you would set a limit order at. You are being paid 2.23% of your collateral per cycle to hold the limit order — and assignment is the plan working, not failing.
3. 3You want the income and are indifferent to owning. Sell the put only on names where indifference is true. The wheel’s entry rule applies unchanged: no premium is large enough to make a stock you don’t want a good thing to be assigned.
4. 4You need this position to be there for a specific rally. Buy the shares. A 41.6% chance of watching the move happen from behind a $980 fence is how put sellers become bitter.

Price your own version

The comparison changes with every ticker, strike and week — which is the point of doing it with live numbers instead of slogans. The exact put from this post is one click away, with the entry pinned:

For the current chain rather than the snapshot, the MSFT cash-secured put page re-prices this structure on every build, and the KO version does the same for the quiet end of the spectrum. If assignment is part of your plan, the wheel guide prices the whole campaign that starts where this post ends.

Caveats worth reading twice

Next: picking the strike with the probabilities shown, or what happens after assignment when the put side of this comparison becomes shares.