What can happen

1. Amazon stays above USD 210
The put option expires worthless. The investor keeps the USD 152 premium, and the cash is released for other opportunities.

2. Amazon falls slightly below USD 210
The investor is assigned 100 shares at USD 210 each, but because they received USD 1.52 per share in premium, the effective purchase price is USD 208.48. They now own the shares at a lower price and can consider selling another option later (for example, a covered call) to generate more income.

3. Amazon drops sharply after earnings
If the price falls far below 210, the investor will still have to buy at that price, which means starting with an unrealised loss. They could choose to roll the option (buy it back and sell a new one at a lower strike and later date) to improve the entry point, or accept the shares if they believe in Amazon long term.

Why long-term investors might use this approach

A cash-secured put aligns with a patient investor mindset. If the stock price stays high, there is a small short-term gain from the premium. If the stock price falls, shares are bought at a lower price already chosen in advance. Either outcome can make sense for investors looking to build a position gradually rather than buying all at once.

This particular setup also benefits from higher option premiums around earnings. Once the results are out, volatility often drops, and option values can shrink quickly. This can work in favour of the option seller, although results may vary.

The key risks

• Market risk: If Amazon drops well below the strike price, the shares could be worth less than what the investor pays.
• Event risk: Earnings announcements can cause unexpected swings, even for large, well-known companies.
• Opportunity cost: If the stock jumps sharply higher, the seller only keeps the premium and misses the rally.
• Capital requirement: Enough cash must be held to buy the shares if assigned. This is what makes the position cash-secured.

How it could be done step-by-step

1. An investor decides on a price where they would genuinely like to own 100 shares of Amazon.
2. They keep enough cash in their account to cover the purchase (USD 21,000 in this example).
3. On their trading platform, they sell one AMZN 210 put expiring 31 October 2025.
4. After earnings, they monitor the position. If the option value falls to a small amount, it may be closed early to lock in most of the premium.
5. If assigned, they can review whether to hold the shares or use another conservative strategy, such as selling covered calls.

FAQ

What does “cash-secured” mean?
It means having enough cash set aside to buy the shares if the option is exercised. This keeps the approach conservative and avoids leverage.

What is a put option?
A put option gives its buyer the right (but not the obligation) to sell shares at a set price. When someone sells a put, they agree to buy those shares if the buyer decides to sell them.

What happens if I don’t have enough cash to buy the shares?
Selling cash-secured puts without the required funds adds risk and is not suitable for beginners.

Why is the option premium higher before earnings?
Before results are announced, the future move is uncertain. That uncertainty increases the value of options, which makes selling them more rewarding—but also riskier.

Can I lose money with this strategy?
Yes. If Amazon’s share price drops far below the strike price, the investor may end up buying shares that are worth less than what they paid. However, compared to buying at today’s price, the entry cost would still be lower by the amount of the premium.