Cash-Secured Put (CSP)
The cash-secured put is the entry mechanism for the Wheel. You sell the right to assign shares to you at a specific price, collect a premium, and either keep the premium (put expires worthless) or accept the shares at your agreed price (assignment). Pass 1 scanner finds the best CSP candidates.
What You're Actually Selling
When you sell a put option, you're selling insurance. The buyer of your put is paying you to protect them against the stock falling below a certain price. If the stock falls below that price, they can "put" the shares to you at the agreed strike. You collect the premium whether or not the put is exercised.
Example: SWN at $6.20. You sell the $6.00 put for $0.30 premium (30 days out). You collect $30 immediately (100 shares × $0.30). Three outcomes at expiration:
1. Stock above $6.00: Put expires worthless. You keep $30. Cost to you: zero. Return: $30 on $600 reserved capital = 5% in 30 days.
2. Stock at exactly $6.00: Put is at the money. May or may not be assigned. Usually expires worthless at exactly the strike.
3. Stock below $6.00: Put is in the money. You are assigned 100 shares at $6.00. Your effective cost basis is $6.00 – $0.30 premium = $5.70. Now enter Phase 3 (covered calls).
Strike Selection — The Delta Guide
Strike selection determines your probability of assignment and the premium you collect. The OPERATOR Wheel system targets a delta of 0.25–0.35 on put strikes, matching the covered call delta target in your tactical CC image.
| Delta | Approx probability of assignment | Premium level | OPERATOR use |
|---|---|---|---|
| 0.15–0.20 | 15–20% | Low | Conservative, low income |
| 0.25–0.35 | 25–35% | Moderate | Target zone — balanced |
| 0.40–0.50 | 40–50% | High | Aggressive, more assignment risk |
DTE Selection — 7–14 Days for Weekly Income
Your tactical CC image shows 1–2 weeks out as the target. This matches the OPERATOR Wheel protocol. Shorter DTE means faster time decay (theta) working in your favor as the seller. 7-day puts lose value fastest in their final week — that's premium you're collecting.
Longer DTE (30-45 days) collects more premium per contract but commits your capital longer and creates wider bid-ask spreads on lower-volume stocks.
Pass 1 Scanner — Quality Filter Before Selling Any Put
WheelPass1_CSP (in your TOS Script Library) runs a quality gate before you sell a single put. Score 65+ required. The scanner checks: price range $3–$8, average volume ≥ 500K, RSI zone 35–55, proximity to support, ATR viability for meaningful premium, and the 5-day gain guard (not in a falling knife).
Before selling any put, the final mental check: if I'm assigned these shares at this strike, am I willing to own them for 30 days while I sell covered calls? If yes → sell the put. If no → skip. No exceptions. This is the quality filter that keeps you out of bad stocks when assignment happens.