See my 6/2/20 post, where to "put" cash? It was an idea that offered an alternative for investors who are unhappy with money market returns. But I put the idea to work this month in my own account. It's a cash account that's used for checkwriting, bill pay, ATM withdrawals, pension & Social Security deposits. It holds about $120K in cash that's in a money market fund that pays a 7-day yield of 0.01%.
On 8/6/21, I sold 23 cash secured puts against XLE, the energy ETF. XLE was trading at $49.69. I sold the $43 puts that expired on 8/20/21. I received a $0.07 premium that netted $152.12. On 8/20/21, XLE closed at $45.89 & my puts expired worthless - i.e., I was not assigned to buy XLE shares at $43. All I earned was $152.12, representing an annualized yield of over 3%. Because this account holds "sacred" cash (especially in my wife's eyes), I would have been really displeased if XLE closed below $43 & I'd have been assigned to buy XLE at $43 (my risk).
Today, I did similarly. XLE traded at $47.69. I sold 22 cash secured puts against it - the $40 puts that expire on 9/17/21. I received a $0.13 premium that netted $270.93 for the 25 day commitment, again representing an annualized yield of over 3%. I have a $7.69 cushion until a $40 put assignment - a 16% cushion.
What's interesting is that prior to the trade, I observed my monthly bill pay debit of $1,548.83 for my credit card against this cash account. After my cash secured put trade, that debit was reduced to $1,277.90 - by exactly $270.93, today's put premium.
Selling puts (& calls) can be helpful - with a controlled amount of risk - to help pay for routine expenses like bill payments. This strategy can also be applied to finance Required Minimum Distributions.
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