How to Set Up a Defensive Cash-Secured Put Trade in Challenging Market Conditions

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Cash-Secured Put and covered call trades can be established as traditional, aggressive or defensive. In March 2025, there was market uncertainty regarding the imposition of multiple tariffs and their potential negative impact on our economy and the stock market.

During this time, I was creating only defensive positions in my option portfolios. In this article, I will share one such 4-week cash-secured trade I executed with DocuSign, Inc. (Nasdaq: DOCU).

Reasons for selecting DOCU from the BCI Premium Stock Report & Watch List

DOCU: $88.15
Selected from BCI database
On our stock list for 1 week (welcome back)
No dividend
Modest implied volatility (IV): 33.2%
Industry segment rank: A (Software)
Next ER: 6/12/2025
Bullish On Balance Volume (OBV)
Analyst rating (MAR) 2.83 (above average)
Weekly options available
$82.50 4/18/2025 deep OTM $82.50 put strike has a bid price of $1.10

DOCU option chain on 3/24/2025 (DOCU: $88.15)

Extremely robust open interest (purple cells)
The $82.50 deep OTM put strike shows a bid price of $1.10 (brown cells)
The Delta of the $82.50 strike is -0.227% (approximate 23% probability of expiring ITM & subject to exercise)
Note: The Delta of puts is negative because put premium is inversely related to share price

DOCU: Initial cash-secured put calculations with our TMC

The spreadsheet shows that, if taken through expiration, this is a 26-day trade (red circle)
The breakeven price is $81.40 (yellow cell)
The initial 26-day return is 1.35%, 18.97% annualized (brown cells)
If share price declines below the $82.50 strike price and no exit strategy intervention is executed, shares will be “put” to us at the breakeven price of $81.40, a 7.66% discount (purple cell) from share price when the trade was initiated

Discussion

By implementing the low-risk option-selling strategy of selling cash-secured puts, we have generated significant initial returns and lowered our breakeven price from $88.15 to $81.40. The BCI 3% guidelines tells us to consider closing the trade if shares price dips below $80.00. These defensive trades are extremely low-risk but are not no-risk trades.

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Over the years, the BCI community has been incredibly gracious by sending our BCI team email testimonials sharing stories as to what our educational content has meant to their families. Moving forward, we have decided to publish several of these testimonials in our blog articles. We will never use a last name unless given permission:

Hi Alan,

I’ve jumped back into my active investing and was a bit rusty.

On 6/14/25 I purchased 500 shares of SOFI at 15.74 and STO 18-Jul $16 calls for .76 per contract.

SOFI ran up very quickly and before I could reach for my Exit Strategy book your recent and for me most timely video on Mid-Contract Unwind was posted. Just what I needed to shake-off the cobwebs.

On 7/9/25 I BTC my 5 options and sold 500 shares SOFI stock for a nice $460 profit.

Same day I turned around and bought ACMR from the latest BCI List

7/9/25 I purchased 500 shares of ACMR at 29.00 and STO 18-Jul 25 $30 calls for .52 per contract.

7/18/28 with ACMR just over my $30 strike price I made the decision to let the trade expire worthless and let the stock get called away. I did so because I noted an even better profit at $760 than I had with SOFI. It was difficult to sell SOFI because of the run-up but I was contracted to sell at a much lower price. So, the TMC and video helped me make a very lucrative decision with doing a Mid-Contract Unwind.

Combined profit for the one-month contract was $1,222 using $22,370 in capital for a 5.4% return.

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Thank you, Alan,

Jim

Premium Member

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