Cash-Secured Puts: Premium With Cash Reserved
Learn how cash-secured puts work, including reserved cash, effective purchase price, assignment and the tradeoff between capital efficiency and leverage.
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OPTIONS EDUCATION GUIDE
Option Liquidity and Bid-Ask Spreads
A theoretically attractive option can be a poor trade if the market is too wide or difficult to exit.
Prepared by Farland Capital Education Team · Educational methodology
Bid and ask
- The bid is the highest displayed price buyers are offering; the ask is the lowest displayed price sellers are offering.
- The gap between them is a real execution cost.
Volume and open interest
- Volume shows contracts traded during the session; open interest reflects outstanding contracts.
- Neither metric alone guarantees easy execution, but both can help describe market participation.
Why liquidity matters more in stress
- Spreads can widen precisely when you most want to adjust or exit.
- Complex multi-leg orders can become especially expensive in thin markets.
Execution discipline
- Use limit orders rather than assuming the displayed midpoint is achievable.
- Prefer liquid underlyings and expirations where competitive markets make entry and exit more efficient.
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Covered Calls: Income, Upside Caps and Assignment
Learn how covered calls work, including premium, upside caps, assignment, strike selection and why covered calls do not eliminate stock downside.
Option Greeks: Delta, Gamma, Theta and Vega for
Learn the core option Greeks and how they interact for short-option positions as price, time and implied volatility change.
Educational purposes only. This page is not individualized investment advice or a recommendation to use any security or strategy. Options involve risk and are not suitable for all investors.