Print this. Follow it. No exceptions. Every Cash Secured Put trade must pass ALL criteria before you enter. This checklist is the difference between systematic income and gambling.
Related Resources:
- 📖 Main CSP Strategy Guide - Complete strategy overview
- 📊 Watchlist & Workflow Guide - Watchlist structure and daily workflow
- 📄 1-Page CSP SOP - Quick reference for your desk
Entry Checklist (All Must Be YES) #
important
Every single checkbox must be YES before entering a trade. One “maybe” or “close enough” is the start of a blown account. Discipline is your edge.
This is a pre-flight checklist. Just like pilots don’t skip steps before takeoff, you don’t skip steps before placing a trade.
Market Context Checks #
Before looking at any individual stock, assess the overall market environment.
| Check | Criteria | Why |
|---|---|---|
| ☐ | VIX < 25 | High VIX = elevated fear. Above 25 means market stress. |
| ☐ | Index above 50-day MA | Confirms short-term uptrend. Below = caution. |
| ☐ | Index above 200-day MA | Confirms long-term uptrend. Below = defensive mode. |
| ☐ | No major macro event in 48h | Fed meetings, CPI, jobs report = elevated vol risk. |
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<span
style="color: #fff3cd"
><p><strong>If any market check fails:</strong></p>
- Reduce position sizes by 50%
- OR skip this week entirely
- Never force trades in hostile environments
Quick Market Check Workflow #
1. Open SPY chart
2. Is price above 50 MA? → YES/NO
3. Is price above 200 MA? → YES/NO
4. Check VIX level → ____
5. Check economic calendar → Any major events?
All YES and VIX < 25? → Proceed to stock selection
Any NO? → Reduce size or skipStock Quality Checks #
Only trade CSPs on companies you’d genuinely want to own.
| Check | Criteria | Why |
|---|---|---|
| ☐ | Profitable company or major ETF | No speculative money-losers. |
| ☐ | No earnings before expiration | Earnings = unpredictable gaps. |
| ☐ | Would gladly own at strike price | If assigned, you’re happy, not disappointed. |
| ☐ | Clear technical support below strike | Adds margin of safety to your position. |
| ☐ | Not in “avoid” category | No small caps, biotech, meme stocks, SPACs. |
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<span class="relative block icon"><svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 320 512"><path fill="currentColor" d="M310.6 361.4c12.5 12.5 12.5 32.75 0 45.25C304.4 412.9 296.2 416 288 416s-16.38-3.125-22.62-9.375L160 301.3L54.63 406.6C48.38 412.9 40.19 416 32 416S15.63 412.9 9.375 406.6c-12.5-12.5-12.5-32.75 0-45.25l105.4-105.4L9.375 150.6c-12.5-12.5-12.5-32.75 0-45.25s32.75-12.5 45.25 0L160 210.8l105.4-105.4c12.5-12.5 32.75-12.5 45.25 0s12.5 32.75 0 45.25l-105.4 105.4L310.6 361.4z"/></svg>
<span
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><p><strong>Automatic Disqualification:</strong></p>
- Earnings within 10 days of expiration
- Stock below 200-day moving average
- Recent negative fundamental news (fraud, scandal, earnings miss)
- You wouldn’t buy the stock at any price
The “Would I Buy” Test #
Ask yourself honestly:
“If this stock dropped 20% tomorrow and I was assigned, would I be excited to own it at a discount - or would I regret the trade?”
If you’d regret it → Don’t sell the put.
Option Metrics Checks #
The specific option contract must meet these criteria.
| Check | Criteria | Target | Notes |
|---|---|---|---|
| ☐ | DTE (Days to Expiration) | 30-45 days | Optimal theta decay zone |
| ☐ | Delta | 0.20 - 0.30 | 70-80% probability of profit |
| ☐ | IV Rank | ≥ 30 | Higher IV = better premiums |
| ☐ | Premium | ≥ 1% of strike | Annualizes to 12%+ |
| ☐ | Strike location | Below recent support | Technical buffer for safety |
| ☐ | Open Interest | ≥ 500 | Ensures liquidity |
| ☐ | Bid-Ask Spread | ≤ 5-10% | Tight spreads = fair pricing |
Premium Calculation #
Premium % = (Premium per Share / Strike Price) × 100
Example:
Strike: $170
Premium: $2.50
Calculation: ($2.50 / $170) × 100 = 1.47%
Target: ≥ 1% per month
This trade: 1.47% ✅ PASSDelta Selection Guide #
graph TD
A[Delta Selection] --> B{Your Risk Tolerance?}
B -->|Conservative| C[0.15 - 0.20 Delta
85% win rate
Lower premium]
B -->|Balanced| D[0.20 - 0.25 Delta
80% win rate
Moderate premium]
B -->|Moderate| E[0.25 - 0.30 Delta
75% win rate
Higher premium]
B -->|Aggressive| F[0.30+ Delta
70% or less
NOT RECOMMENDED]
style C fill:#0f5132,stroke:#75b798,color:#d1e7dd
style D fill:#0f5132,stroke:#75b798,color:#d1e7dd
style E fill:#664d03,stroke:#ffc107,color:#fff3cd
style F fill:#842029,stroke:#ea868f,color:#f8d7da
Capital Management Checks #
Position sizing is where most traders fail. These rules are non-negotiable.
| Check | Criteria | Example ($100k) |
|---|---|---|
| ☐ | ≤ 7% of total capital per position | Max $7,000 per CSP |
| ☐ | Sector exposure ≤ 2 positions | No more than 2 tech stocks at once |
| ☐ | Cash buffer intact (≥ 20-25%) | Always keep $20-25k uninvested |
| ☐ | Total deployed ≤ 75-80% | Never fully invest your capital |
Position Sizing Calculator #
Total Capital: $100,000
Maximum per position (7%): $7,000
For a $170 strike put:
Cash required: $17,000 (1 contract = 100 shares × $170)
Exceeds 7%? YES → Consider lower-priced underlying
For a $70 strike put:
Cash required: $7,000 (1 contract = 100 shares × $70)
Exceeds 7%? NO → Position size acceptable ✅Capital Deployment Tracker #
| Position | Underlying | Cash Required | % of Capital | Sector |
|---|---|---|---|---|
| 1 | AAPL | $17,000 | 17% | Tech |
| 2 | MSFT | $42,000 | 42% | Tech |
| 3 | ??? | ??? | ??? | ??? |
| Total | - | $59,000 | 59% | 2 Tech |
| Buffer | - | $41,000 | 41% | - |
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<span class="relative block icon"><svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 512 512"><path fill="currentColor" d="M506.3 417l-213.3-364c-16.33-28-57.54-28-73.98 0l-213.2 364C-10.59 444.9 9.849 480 42.74 480h426.6C502.1 480 522.6 445 506.3 417zM232 168c0-13.25 10.75-24 24-24S280 154.8 280 168v128c0 13.25-10.75 24-23.1 24S232 309.3 232 296V168zM256 416c-17.36 0-31.44-14.08-31.44-31.44c0-17.36 14.07-31.44 31.44-31.44s31.44 14.08 31.44 31.44C287.4 401.9 273.4 416 256 416z"/></svg>
<span
style="color: #f8d7da"
><strong>Stop!</strong> In this example, adding another Tech position would violate the 2-position sector rule. Next position must be from a different sector.</span>
Strike Selection Rule #
tip
When in doubt, go lower on strike selection. You’ll sleep better, and a slightly lower premium from a safer strike compounds better than a blown trade from being aggressive.
When multiple strikes meet your criteria, use this decision framework:
Choose the HIGHEST strike that meets ALL of the following:
- ✅ Below major support level - Technical buffer
- ✅ Delta ≤ 0.30 - Probability filter
- ✅ Monthly premium ≥ 1% - Return threshold
- ✅ You would buy shares at that price - The gut check
If torn between two strikes → Go with the LOWER strike.
Being conservative on strike selection is how you stay in the game long-term.
Strike Selection Example #
Stock: AAPL at $185 Support level: $175
| Strike | Delta | Premium | Premium % | Below Support? | Decision |
|---|---|---|---|---|---|
| $180 | 0.35 | $4.50 | 2.5% | NO | ❌ Too aggressive |
| $175 | 0.28 | $3.20 | 1.8% | ON support | ⚠️ Borderline |
| $170 | 0.22 | $2.50 | 1.5% | YES | ✅ Best choice |
| $165 | 0.15 | $1.50 | 0.9% | YES | ⚠️ Premium too low |
Selection: $170 strike - Meets all criteria with comfortable margin of safety.
Position Management Rules #
Once you’re in a trade, follow these rules for managing it.
Profit Taking Rules #
Don’t get greedy. Take profits systematically.
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><p><strong>Close the position when EITHER condition is met:</strong></p>
| Condition | Action |
|---|---|
| ☐ 50-70% of max profit achieved | Close immediately |
| ☐ ≤ 21 DTE remaining | Close regardless of profit % |
Whichever comes first.
Why Close at 50-70%? #
The math: After 50% profit, you’re risking 50% of your remaining profit to capture the last 50%. Risk/reward becomes unfavorable. Close and redeploy capital.
Rolling Rules #
Rolling means closing your current position and opening a new one with different terms. This is an advanced technique that should be used sparingly.
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><p><strong>Roll ONLY IF all conditions are met:</strong></p>
| Condition | Requirement |
|---|---|
| ☐ | Underlying still high quality (fundamentals unchanged) |
| ☐ | Roll for net credit (receive more than you pay) |
| ☐ | New DTE ≤ 45 days |
| ☐ | New strike still acceptable for ownership |
| ☐ | Not “rolling down” just to avoid assignment |
When NOT to Roll #
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<span class="relative block icon"><svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 320 512"><path fill="currentColor" d="M310.6 361.4c12.5 12.5 12.5 32.75 0 45.25C304.4 412.9 296.2 416 288 416s-16.38-3.125-22.62-9.375L160 301.3L54.63 406.6C48.38 412.9 40.19 416 32 416S15.63 412.9 9.375 406.6c-12.5-12.5-12.5-32.75 0-45.25l105.4-105.4L9.375 150.6c-12.5-12.5-12.5-32.75 0-45.25s32.75-12.5 45.25 0L160 210.8l105.4-105.4c12.5-12.5 32.75-12.5 45.25 0s12.5 32.75 0 45.25l-105.4 105.4L310.6 361.4z"/></svg>
<span
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><p><strong>Never roll in these situations:</strong></p>
- ❌ To avoid a loss you should accept
- ❌ When fundamentals have changed
- ❌ When the roll is for a debit (you pay money)
- ❌ When the new strike is below a price you’d want to own
- ❌ As a form of “hope trading”
Good Roll vs. Bad Roll #
Good Roll Example:
Original: AAPL $170P, 7 DTE, -$0.50 loss
Roll to: AAPL $165P, 35 DTE
Net credit: +$1.20
New strike acceptable? YES
Fundamentals changed? NO
✅ ACCEPTABLE ROLLBad Roll Example:
Original: XYZ $50P, 7 DTE, -$3.00 loss
Roll to: XYZ $45P, 35 DTE
Net credit: +$0.50
New strike acceptable? BARELY
Fundamentals changed? YES (earnings miss)
❌ DON'T ROLL - Accept assignment or closeAssignment Rules #
If the stock drops below your strike at expiration, you’ll be assigned. This is not a failure - it’s part of the strategy.
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<span
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><p><strong>When Assigned:</strong></p>
- ☐ Accept shares calmly - You sold a put on a stock you wanted
- ☐ Calculate your cost basis - Strike price minus premium received
- ☐ Evaluate next steps - Hold, sell covered calls, or exit
Post-Assignment Decision Tree #
graph TD
A[You Got Assigned] --> B{Fundamental thesis intact?}
B -->|YES| C{Want to continue holding?}
B -->|NO| D[Sell shares immediately
Accept the loss]
C -->|YES| E[Hold shares
Consider covered calls]
C -->|NO| F[Sell shares
Move to next opportunity]
E --> G{Sell covered calls?}
G -->|YES| H[Strike ABOVE cost basis only
30-45 DTE, 0.20-0.30 delta]
G -->|NO| I[Continue holding
Wait for recovery]
style D fill:#842029,stroke:#ea868f,color:#f8d7da
style H fill:#0f5132,stroke:#75b798,color:#d1e7dd
Covered Call Rules (Post-Assignment) #
If you decide to sell covered calls on your assigned shares:
| Rule | Requirement |
|---|---|
| ☐ | Strike ABOVE your cost basis |
| ☐ | 30-45 DTE |
| ☐ | Delta 0.20 - 0.30 |
| ☐ | Never sell calls below your cost basis |
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<span class="relative block icon"><svg xmlns="http://www.w3.org/2000/svg" viewBox="0 0 512 512"><path fill="currentColor" d="M506.3 417l-213.3-364c-16.33-28-57.54-28-73.98 0l-213.2 364C-10.59 444.9 9.849 480 42.74 480h426.6C502.1 480 522.6 445 506.3 417zM232 168c0-13.25 10.75-24 24-24S280 154.8 280 168v128c0 13.25-10.75 24-23.1 24S232 309.3 232 296V168zM256 416c-17.36 0-31.44-14.08-31.44-31.44c0-17.36 14.07-31.44 31.44-31.44s31.44 14.08 31.44 31.44C287.4 401.9 273.4 416 256 416z"/></svg>
<span
style="color: #fff3cd"
><strong>Critical:</strong> Selling covered calls below your cost basis locks in a loss if called away. Only do this if you’ve decided to exit the position anyway.</span>
Defensive Rules #
warning
The market doesn’t care about your cost basis or your hope for recovery. When fundamentals break, exit quickly. The goal is staying in the game, not being right on every trade.
When the market or your position turns against you, follow these rules.
If Stock Drops Hard #
Step-by-Step Response:
- ☐ Do nothing until ≤ 21 DTE - Don’t panic close
- ☐ Reassess fundamentals - Has anything actually changed?
- ☐ Accept assignment if conviction remains - You wanted this stock
- ☐ Convert to covered call above cost basis only - If you want to wheel
Remember: Paper losses are not real losses until you close.
When to Take a Loss #
Sometimes cutting losses is the right move. Here’s when:
Accept the Loss When:
| Trigger | Action |
|---|---|
| ☐ Fundamental break | Fraud, scandal, major earnings miss, guidance cut |
| ☐ Index breaks 200 MA decisively | Market regime shift - defensive mode |
| ☐ Position exceeds 2× planned duration | You’ve been rolling too long |
| ☐ Your thesis was wrong | Be honest with yourself |
Hard NO Rules #
These are absolute rules. Breaking them leads to blow-ups.
Never, Ever Do These:
| Rule | Why |
|---|---|
| 🚫 No weeklies | Too much gamma risk, too little premium |
| 🚫 No earnings plays | Binary events are gambling, not trading |
| 🚫 No margin | Cash secured means CASH |
| 🚫 No revenge trades | Trying to “make back” losses leads to bigger losses |
| 🚫 No “high IV garbage” | High IV on junk stocks = trap |
| 🚫 No meme stocks | EVER. No GME, no AMC, no whatever is trending |
| 🚫 No FOMO | Missing a trade is free. Forcing a bad trade costs money |
Pre-Trade Checklist (Printable Summary) #
Copy this checklist and use it for every trade:
═══════════════════════════════════════════════════════════════
CSP ENTRY CHECKLIST
═══════════════════════════════════════════════════════════════
MARKET CONTEXT (All must be YES)
☐ VIX < 25
☐ Index above 50 MA
☐ Index above 200 MA
☐ No major event in 48h
STOCK QUALITY (All must be YES)
☐ Profitable company / ETF
☐ No earnings before expiration
☐ Would gladly own at strike
☐ Clear support below strike
OPTION METRICS (All must be YES)
☐ DTE: 30-45 days
☐ Delta: 0.20-0.30
☐ IV Rank ≥ 30
☐ Premium ≥ 1% of strike
☐ Open Interest ≥ 500
☐ Bid-Ask spread ≤ 10%
CAPITAL RULES (All must be YES)
☐ Position ≤ 7% of capital
☐ Sector exposure ≤ 2 positions
☐ Cash buffer ≥ 20% after trade
═══════════════════════════════════════════════════════════════
ALL BOXES CHECKED? → EXECUTE TRADE
ANY BOX UNCHECKED? → DO NOT TRADE
═══════════════════════════════════════════════════════════════
Trade Details:
Underlying: _______________
Strike: _______________
Expiration: _______________
Premium: _______________
Delta: _______________
Date: _______________
═══════════════════════════════════════════════════════════════Final Word #
The Discipline Dividend
Following this checklist religiously will feel restrictive at first. You’ll see “opportunities” you have to pass on. You’ll feel like you’re leaving money on the table.
You’re not.
You’re avoiding the trades that blow up accounts. You’re building the discipline that compounds over years. You’re becoming the kind of trader who stays in the game.
The checklist isn’t a constraint. It’s your edge.
Disclaimer: This is educational content. Options trading involves significant risk. Past performance does not guarantee future results. Always do your own research.