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Module 3 Quiz — Selling the Cash-Secured Put

5 questions · study aid format (answers + rationales visible). Complete after Module 3.

Q1. What does a put's delta represent (approximately) for wheel selection?

  1. The dollar amount you'll lose if the stock drops $1
  2. ✓ The probability that the put ends in-the-money at expiration (i.e., that you get assigned)
  3. The rate of time decay per day
  4. The historical volatility of the underlying
Delta is technically a hedge ratio, but for wheel-selection purposes it approximates assignment probability. A -0.25 delta put has roughly a 25% assignment probability.

Q2. What is the Omega default delta range for selling puts?

  1. 0.05 – 0.15
  2. ✓ 0.20 – 0.30
  3. 0.35 – 0.50
  4. 0.50+
0.20–0.30 gives ~70–80% probability of expiring worthless AND meaningful premium. Too low = too little premium. Too high = too much assignment risk.

Q3. Why do we default to 30–45 DTE (days to expiration)?

  1. It's a regulatory requirement for cash-secured puts
  2. ✓ Theta decay accelerates in this window, capital turnover is reasonable, and there's time to react if the trade moves against you
  3. It's the only DTE most brokers support for beginners
  4. It maximizes the tax efficiency of the trade
Shorter DTE = less premium, more gamma risk near expiration. Longer DTE = capital locked up too long, less flexibility. 30–45 is the sweet spot.

Q4. On a $50,000 account, what's the maximum total collateral you should have committed across all open puts?

  1. $75,000 (150% via margin for leverage)
  2. $60,000 (120% via margin)
  3. ✓ $50,000 max, but ideally $40,000 to leave a 20% cash cushion
  4. Doesn't matter — the broker enforces limits automatically
Total collateral can never exceed total cash without silently using margin. Keeping a cushion also lets you play offense during volatility spikes.

Q5. What's the best order type for opening a wheel put position?

  1. ✓ Limit order at the midpoint (or 1 cent below) of the bid-ask spread
  2. Market order at the current bid
  3. Stop-limit order below the strike
  4. All-or-none order at the ask
Market orders on options routinely fill 10–30% worse than midpoint. Limit orders at midpoint capture better prices; if not filled in 5–10 min, adjust slightly toward the bid.