Assigned Put Basis Is Strike Minus Premium
When a cash-secured put is assigned, the share cost basis is the strike less the premium already received—not the strike alone, and not the premium counted twice. One table walks the math with fees excluded.
YieldCove Desk
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Example strike
$50.00
Premium received
$1.50 / sh
Cash reserved (1 put)
$5,000
Effective basis
$48.50 / sh
The one-line rule
A cash-secured put is a short put written while enough cash is set aside to buy the shares if the put is assigned. The Options Industry Council (OIC) describes the goal as acquiring stock and states the plain formula for the acquisition price: the strike price, less the premium received. OIC also writes the short-term breakeven the same way: breakeven = strike price − premium.
Keep the premium in only one place
After assignment, lower the share basis by the premium. Do not also book that same premium as a separate finished profit on top of the new stock position. The cash is real on day one; the economics after assignment live in the reduced basis.
Why the reserved cash is 100× the strike
Standard U.S. equity option examples treat one contract as control of 100 shares. OIC’s own cash-secured put illustration pairs a $60 strike with $6,000 of reserved cash—exactly 60 × 100. That is the unit used in the worked example below. Fees, commissions, and taxes are excluded so the identity stays visible.
Worked example (educational numbers only)
Suppose one put is sold at a $50.00 strike for a $1.50 per-share premium. The cash reserved to secure assignment is $50.00 × 100 = $5,000. Premium cash received is $1.50 × 100 = $150. If assigned, the shares are purchased at the strike, and the premium already received reduces the net cash tied up in the stock.
| Step | Per share | One contract (×100) |
|---|---|---|
| Strike / purchase price if assigned | $50.00 | $5,000.00 |
| Premium received when the put was sold | $1.50 | $150.00 |
| Cash reserved to secure the put | — | $5,000.00 |
| Effective share basis after assignment | $48.50 | $4,850.00 |
| Net cash outlay if assigned (reserved cash − premium) | — | $4,850.00 |
Two rows must match: $48.50 × 100 = $4,850, and $5,000 − $150 = $4,850. That identity is the whole lesson. OIC labels the comparable maximum-loss line as strike price − premium received (substantial) when the stock goes to zero—the premium softens the loss versus buying at the full strike with no credit.
The double-count trap
Incorrect story: “I collected $150 of profit and I own stock with a $48.50 basis that already embeds that $150.” Correct story: the $150 either reduced basis to $48.50, or it is still open option P/L before assignment—not both as finished gains stacked on the same dollars.
What assignment does—and does not—mean
OIC defines assignment as OCC’s notification that an option owner exercised. For equity options, assignment is allocated on a random basis among clearing members. A cash-secured put writer who wants the stock treats assignment as the acquisition path, not an unexpected glitch. Assignment is still not assured: if the stock stays above the strike, the put can expire and the writer keeps only the premium.
- Before assignment: premium is cash received against an open short-put obligation.
- At assignment: shares are bought at the strike; effective basis becomes strike − premium (fees excluded here).
- After assignment: later stock gains or losses are measured from that reduced basis, not from a “free” premium plus a full-strike cost.
Still not downside protection
Reducing basis by the premium is not a hedge that caps further stock declines. If the shares keep falling after assignment, losses continue below the reduced basis. Cash-secured describes funding readiness, not a floor under the stock.
Beginner corner
Strike is the fixed price in the option contract. Premium is the price of the option, usually quoted per share. Cash-secured means enough cash is set aside to buy the shares if assigned. Basis (cost basis) is the effective purchase price used later to measure stock P/L. None of the example dollars above are a recommendation to sell a put or buy a stock.
Sources
- [1]Cash-Secured Put strategy note — Options Industry Council (OIC) · Accessed 2026-08-19 · Tier 1
- [2]Options Glossary — Assignment / American-style option — Options Industry Council (OIC) · Accessed 2026-08-19 · Tier 1
This content is for informational and educational purposes only and is not financial advice. Options involve risk and are not suitable for every investor. Do your own research before trading.
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