Cash-Secured Puts to Generate Income: Dollar Cost Averaging with Weekly Options

Introduction: Dual-Purpose Cash-Secured Puts

Most traders think of cash-secured puts as simply a way to collect premium. But when used strategically, this options strategy serves a dual purpose: generating consistent weekly income while simultaneously lowering your overall cost basis through planned assignments.

In this guide, we'll walk through real-world examples of cash-secured put assignments on Novavax Inc. (NVAX) and Rumble (RUM), demonstrating how to track these positions, process assignments, and leverage the cost basis tracking features on MyATMM.com to make informed trading decisions.

Understanding the Cash-Secured Put Strategy

What Are Cash-Secured Puts?

A cash-secured put is an options strategy where you sell a put option contract while setting aside enough cash to purchase 100 shares of the underlying stock if assigned. This strategy generates immediate premium income and positions you to acquire stock at a predetermined price.

The Dollar Cost Averaging Advantage

When you're assigned on a cash-secured put, you purchase shares at the strike price. If you already own shares at a higher price, this assignment lowers your average cost per share—a form of dollar cost averaging that's both strategic and premium-generating.

Why Weekly Options?

Weekly options provide several advantages for this strategy:

• Higher Time Decay: Options decay faster in the final week, allowing you to capture more time value relative to the holding period
• Flexibility: Weekly cycles allow rapid adjustment to market conditions
• Consistent Cash Flow: Weekly expirations create regular income opportunities
• Lower Commitment: Shorter timeframes mean less capital tied up per contract

Real Trading Example: Rumble (RUM) Assignment

Initial Position Analysis

Let's examine a real cash-secured put assignment on Rumble (RUM) and how it impacted the overall position cost basis.

Processing the Assignment

When the put expired in-the-money, the assignment process involved several steps that MyATMM's cost basis tracking made simple:

1. Navigate to Cost Basis Screen: Access the ticker's detailed position view
2. Locate the Expired Put: Find the $7.50 strike put that expired on Friday
3. Select Assignment Action: Choose "Assign" from the dropdown menu
4. Confirm Assignment Details: 100 shares purchased at $7.50 strike price
5. Generate Transaction Record: Create the buy-to-open stock transaction at $7.50
6. Update Position: Move the transaction to permanent history

Cost Basis Impact

The assignment resulted in a significant cost basis reduction:

Strategic Positioning

With the stock trading at $6.44 following the assignment, the cost basis of $10.17 might seem concerning. However, this creates the perfect setup for the next strategic move:

• Sell Another Cash-Secured Put: Target the $6.00 strike for the upcoming week
• Collect Additional Premium: Generate income while stock is below cost basis
• Lower Collateral Requirement: Only $600 collateral needed for $6 strike
• Further Cost Basis Reduction: If assigned, cost basis drops even further

Real Trading Example: Novavax (NVAX) Assignment

Initial Position Status

The Novavax position demonstrated an even more dramatic cost basis improvement through strategic put assignments.

Assignment Workflow

Processing the NVAX assignment followed the same systematic approach:

1. Identify the Expired Put: Located the $11.00 strike put that expired below the strike price
2. Execute Assignment: Selected "Assign" from dropdown, confirmed 100 shares at $11.00
3. Generate Transaction Record: Created buy-to-open stock entry for assignment
4. Clean Up Proposed Records: Removed temporary calculation entries
5. Finalize Transaction: Moved completed transaction to permanent history

Significant Cost Basis Improvement

The NVAX assignment demonstrated the power of this strategy for high-cost-basis positions:

Continuing the Strategy

With the stock trading at $9.65 and a cost basis of $22.46, multiple strategic options emerge:

• Sell Additional Puts: Target $9.50 or $9.00 strikes for weekly premium
• Collect High Premium: High cost basis allows aggressive covered call strikes
• Continue Dollar Cost Averaging: Each assignment further lowers the average cost
• Plan Breakeven Exit: Calculate exact strike prices needed to exit at breakeven including all collected premiums

Leveraging MyATMM for Cost Basis Precision

Why Accurate Cost Basis Tracking Matters

When executing dollar cost averaging strategies through cash-secured puts, knowing your exact cost basis at all times is crucial for making informed decisions about:

• Which strike prices to target for maximum premium
• When to accept assignments versus rolling positions
• How much additional capital to deploy
• What exit strategies will achieve your profit goals

Key MyATMM Features for This Strategy

Assignment Processing Workflow

MyATMM streamlines the assignment process that would otherwise require complex spreadsheet calculations:

1. Automatic Detection: Expired puts appear in the position view
2. Simple Assignment Action: Select "Assign" from dropdown menu
3. Auto-Calculation: System calculates new shares and strike price
4. Proposed Record Generation: Creates transaction record with correct details
5. One-Click Transfer: Move proposed record to permanent history
6. Instant Cost Basis Update: See new blended cost basis immediately

Planning Future Trades

The proposed cost basis feature lets you model future assignments before they happen:

Best Practices for Cash-Secured Put Dollar Cost Averaging

Strike Selection Strategy

Choosing the right strike prices balances premium income with assignment probability:

• At-the-Money Strikes: Maximum premium collection, 50% probability of assignment
• Slightly Out-of-the-Money: Good premium with lower assignment risk
• Deep Out-of-the-Money: Lower premium but higher probability of expiring worthless
• Cost Basis Considerations: If your goal is to lower cost basis, favor strikes more likely to be assigned

Capital Management

Effective cash-secured put selling requires disciplined capital allocation:

When to Accept Assignment vs. Roll

Not every in-the-money put should be allowed to assign. Consider rolling instead when:

• Temporary Price Dip: Stock fell briefly but you expect recovery
• Better Premium Available: Rolling out and down generates more premium than assignment
• Capital Constraints: You don't want to tie up additional capital
• Cost Basis Already Low: Further lowering wouldn't provide strategic benefit

Accept assignment when:

• High Cost Basis Position: Assignment significantly lowers average cost
• Long-Term Bullish: Happy to own more shares at this price
• Wheel Strategy Active: Planning to sell covered calls against new shares
• Rolling Premium Insufficient: Not enough credit to make rolling worthwhile

Premium Reinvestment Strategy

Consider how to deploy premium collected from puts:

• Reserve for Assignments: Hold premium as collateral for future assignments
• Reinvest in New Positions: Use premium to fund puts on other tickers
• Reduce Overall Cost: Apply premium to reduce net capital committed
• Build Cash Buffer: Maintain liquidity for market opportunities

Advanced Strategy Considerations

Planning Your Exit Strategy

Before entering any cash-secured put position, plan your eventual exit:

Covered Call Transition

Once you've built a position through put assignments, transition to covered calls:

• Calculate Breakeven: Determine what call strike covers your cost basis plus collected premium
• Premium Collection: Continue generating income while holding shares
• Bilateral Trading: Sell puts when assigned, sell calls when stock recovers
• Wheel Strategy: Continuously cycle between puts and calls

Tax Implications

Be aware of the tax treatment for cash-secured puts:

• Premium Income: Treated as short-term capital gain when put expires worthless
• Assignment Impact: Strike price becomes cost basis; premium reduces overall cost
• Holding Period: Assignment starts a new holding period for tax purposes
• Wash Sale Rules: Consider implications when realizing losses

Note: Always consult with a qualified tax professional regarding your specific situation.

Risk Management

While this strategy is conservative, risks still exist:

Real Results: What This Strategy Achieves

Income Generation

The primary benefit of weekly cash-secured puts is consistent income:

Cost Basis Reduction

Strategic assignments create meaningful cost basis improvements:

• RUM Example: 5.0% cost basis reduction ($10.70 to $10.17)
• NVAX Example: 10.2% cost basis reduction ($25.00 to $22.46)
• Compounding Effect: Multiple assignments create exponential benefits
• Premium Offset: Collected premium further reduces net cost

Position Building

This approach allows systematic position accumulation:

• Build positions gradually without large capital outlay
• Dollar cost average automatically through assignments
• Get paid to accumulate shares (via premium collection)
• Control position sizing with strike and contract selection

How MyATMM Simplifies This Strategy

Executing cash-secured put strategies with cost basis tracking is complex. Manual spreadsheet tracking requires formulas, constant updates, and leaves room for errors that can impact your trading decisions.

MyATMM was built specifically for option sellers who need accurate cost basis tracking across assignments, rollings, and premium collection. The platform handles all the calculations automatically:

• Instant Cost Basis Updates: Every assignment automatically recalculates your blended cost per share
• Proposed Cost Basis Preview: See how potential assignments will affect your cost before they happen
• One-Click Assignment Processing: Convert expired puts to stock positions with automatic transaction generation
• Premium Tracking: See total premium collected per ticker to calculate true net cost
• Position Overview: Dashboard view shows all active positions, collateral requirements, and cost basis at a glance
• Transaction History: Complete audit trail showing every adjustment to your cost basis

Stop wrestling with spreadsheets and start tracking your option positions the way they're meant to be tracked—with purpose-built tools designed for option sellers.

Conclusion: Building Wealth Through Strategic Cash-Secured Puts

Cash-secured puts offer a powerful dual-purpose strategy: generating consistent weekly income while systematically lowering your cost basis through strategic assignments. As demonstrated with the RUM and NVAX examples, this approach allows you to build positions gradually, get paid to accumulate shares, and improve your average cost through dollar cost averaging.

The key to success with this strategy is accurate cost basis tracking. Knowing exactly where you stand at all times enables confident decision-making about which strikes to target, when to accept assignments, and how to transition to covered calls for continued income generation.

Whether you're managing a few positions or tracking dozens of tickers, having the right tools makes the difference between spreadsheet frustration and systematic success. MyATMM provides the cost basis tracking precision that option sellers need to execute these strategies with confidence.

Risk Disclaimer

Options trading involves significant risk and is not suitable for all investors. Cash-secured puts obligate you to purchase shares at the strike price if assigned, which can result in substantial losses if the stock declines significantly. Past performance does not guarantee future results.

The examples shown (RUM and NVAX) are for educational purposes only and should not be considered recommendations to trade these specific securities. Your individual results will vary based on market conditions, trade execution, and position sizing decisions.

This content is for educational and informational purposes only and should not be considered financial advice. Always consult with a qualified financial advisor before making investment decisions. Ensure you fully understand the risks of options trading before implementing any strategy.