Selling cash-secured puts on IWM

Selling a put transfers the downside between $284 and zero to you, and you are paid $3.16 per share for taking it. "Cash-secured" simply means you hold the $28,400 required to buy the shares instead of leaning on margin. Same position, honest denominator.

At August 28, 2026: above $284 the put expires worthless and you keep $316 — that is the maximum this trade can make, $316. Below it you're assigned 100 shares at $284, with an effective cost basis of $280.84 once the credit is applied. That is 3.6% below where IWM trades today.

The engine puts the probability of keeping the full credit at 74% on IWM at $291.2 with 19% ATM implied vol on the Aug 28 expiry. High win rate, capped payoff, uncapped-to-zero loss — the risk profile of every short-premium trade. It is not free money; it is a rent cheque for underwriting someone else's insurance.

The real-world failure mode is a gap, and IWM has the catalysts for one: rate expectations, regional-bank headlines, and quarterly Russell rebalancing. A put sold 2.5% out of the money offers no protection at all against a move twice that size overnight.

Assignment is not the loss — being assigned at $284 when IWM is at $227.2 is. If you are running the wheel, that is the moment the plan is tested: you own shares at a basis of $280.84 and the market disagrees.

Early assignment is an operational risk rather than a market one: it arrives on a weekend, converts a defined structure into a stock position, and requires cash you may have allocated elsewhere.

The richest index premium on this list, and the one that most reliably pays for itself — small-cap implied vol has run a wider gap over realized than SPY's for years. The catch is trend: IWM does not chop, it goes, and a short strike that looked comfortable at 0.16 delta gets run over in a week when the rate narrative flips.

IWM's Aug 28 strikes are $1 apart near the money (0.34% of spot). At that granularity the strike ladder stops being a constraint on the trade and starts being a genuine choice. 72k contracts of open interest on Aug 28 is workable around the money and thin in the wings — width costs more here than the ladder suggests. 55 strikes on that expiry — 47% of the board — carry prints that agree with their own implied volatility and hold up across the ladder, and those are the strikes priced here. Deep enough for four legs at retail size; the wings thin out faster than on SPY, so cap width at what the book supports.

Skew is ordinary — the 25-delta put implies 4.9% more vol than the 25-delta call, about what an equity surface looks like when nothing unusual is being priced. Neither side of the chain is being singled out, which is the condition under which a symmetric structure like a condor is actually symmetric. The term structure is flat inside 1.5% between the two captured expiries, so there is no calendar edge to harvest and no event visibly priced into one month over the other.

At 19% ATM implied vol, the Aug 28 options are pricing a one-standard-deviation move of $15.01 over 27 days — roughly −5.2% to +5.2%, or $276.19 to $306.21. A short-premium structure here is a bet that 5.2% over 27 days is more than IWM will actually use. That is the thesis, stated honestly.

The mistake this name punishes hardest: Selling the wings because the index label implies mean reversion. IWM's realized distribution has fatter shoulders than SPY's at the same implied vol.