Buying power for cash-secured puts vs spreads
How much capital a cash-secured put and a put credit spread tie up, why the return on that capital differs so much, and what each did in our replays.
Collateral for a cash-secured put
A cash-secured put sets aside the full strike times 100: the cash needed to buy the shares if assigned. On an index fund priced in the hundreds, one contract can tie up tens of thousands. The premium is small next to that, so return on collateral per trade is small too.
In a margin account a broker may require less, but the risk is the same: a gap to zero still costs the full strike less the premium.
Collateral for a put credit spread
A put credit spread sells a put and buys a lower one. The most you can lose is the width between strikes minus the credit, and that is what the broker holds. A 5% wing on an index fund needs a small fraction of the cash-secured amount.
So the same short put can be a low-return trade on a large base or a higher-return trade on a small one. That is what the per-trade numbers below reflect.
What each earned
On QQQ from 2016 to 2026, a 25-delta cash-secured put held 30 to 45 days earned about plus 0.4% to plus 0.5% a trade on collateral. The put credit spread with a 5% wing on the same entries earned about plus 6.0% a trade on dollars at risk, positive in nine of eleven years, with 2018 and 2022 the losers. On SPY it was plus 4.1%.
The capital difference is large: an earlier capital-year study put the spread at roughly six to seven times the return per collateral dollar, and found that at a small account size one index put could use most of the pool.
The catch
The spread's higher return on capital comes with a loss that is a much larger multiple of its win. Losses arrive as gaps, and stop-losses and early exits did not fix that in our tests. Size against the defined maximum loss, not the collateral the broker holds: in a monthly bootstrap, risking 10% of equity per spread showed no 20% drawdown in a year, 15% about 3%, and 20% about 15%.
A cash-secured put ties up more capital but its worst case on a broad index fund was smaller per dollar held. The guides on cash-secured puts and put credit spreads go further on each.
Historical replays are not a forecast. Options can lose more than the premium collected. This is education, not a recommendation to trade anything.