PutFinder › Methodology

How PutFinder scores a cash-secured put

By Jeffery He, who builds PutFinder in public (X · GitHub).

PutFinder documents every factor behind the score and how they combine into a single relative rank. This page describes the shape and philosophy of that model.

What the score is — and what it is not

The PutFinder score is a relative ranking heuristic, not a return predictor, a valuation, or a recommendation. A high score means a contract sits near the top of today's pool on a premium-versus-risk basis — it does not say the trade is “good,” and it does not forecast a profit. Annualized yield is arithmetic on the current premium, not an expected return. Delta is a model estimate of the option's sensitivity to the stock, not a forecast. The decision always stays with you; PutFinder ranks and documents, it does not advise.

The factors

Each eligible contract is measured on a small set of factors. Every one is computed from stored raw inputs and is reproducible — nothing is invented. To compute the arithmetic factors — annualized yield, breakeven, and downside buffer — for a single contract on your own inputs, use the free cash-secured put calculator.

Stock Score

Underlying quality

A curated read on the underlying stock, so the premium is weighed against the kind of name you would be assigned. Screening is limited to a curated universe of liquid US stocks.

Volatility risk premium (VRP)

The gap between a stock's implied volatility and its realized volatility — how richly its options are priced relative to how much the stock has actually been moving. PutFinder uses it as one minor input among several; a wide gap describes today's option pricing, not an edge and not a predicted return. Computed from one canonical IV30 measure, not recomputed inline.

Trend

Rewards a long-term uptrend sitting near, but not below, a support level (its 50-day average), and penalizes a falling knife. A stock-level posture, separate from the strike-level support check in downside buffer below.

Contract Fit

Annualized yield

The option premium expressed as a per-year rate on the capital secured. A comparison figure — arithmetic on the current premium, not an expected or guaranteed return.

Downside buffer

How far the stock can fall, as a percentage of the current price, before it reaches the strike. A bigger buffer means more room to be wrong. Buffer is measured to the strike, not to the (lower) breakeven.

Catalyst multiplier

Earnings gate

Earnings that land before an option expires add event risk. Applied as a multiplier (0.0–1.0) on the final score — not a weighted term — so a severe gap can zero out an otherwise high-scoring setup rather than merely discounting it.

Related terms

Probability of profit (PoP)

A model-estimated probability the option expires worthless, derived from its delta. A model estimate, not a historical win rate.

Days to expiration (DTE)

The number of days from today until the option expires. A shorter-dated contract reaches its outcome sooner and has to be re-established more often to hold a position; a longer-dated one ties up the cash or shares backing it for longer. Annualizing a premium spreads it over a year either way, so it is a comparison figure rather than a statement about which length is better.

Eligibility gate — applied before scoring

Liquidity

Whether the contract is tradable in practice — tight enough markets and real volume — rather than a quote that only looks attractive on screen. A contract that fails this gate is discarded before scoring and never appears; it does not lower the score.

How the factors combine

The factors combine in two layers, then a gate: Final Score = (Stock Score ÷ 100) × Contract Fit × the earnings-gate multiplier. This is deliberately multiplicative, not additive — a great stock with a weak contract, or a strong contract on a falling-knife stock, both score low, since either layer can pull the product down. Liquidity is an eligibility gate applied before any of this scoring runs. The weightings and the bands that map each factor onto the score are calibrated over time in configuration — not fixed published constants — so the model can be recalibrated against the data without rewriting the logic. Ties are broken deterministically, so the same inputs always produce the same ordering. The output is a shortlist ranked by that relative score, with every input shown next to it.

Eligibility and the data

Before scoring, contracts must clear eligibility: a 14–45 day time-to-expiration window (centered around one month), the liquidity filters above, a place in the curated universe, and fresh data — stale quotes are excluded rather than scored on old numbers. The option chain comes from a real-time data provider and is treated as the source of truth: prices, implied volatility, greeks, and volume are never fabricated. All option prices are handled on a strict per-share basis, and where a chain delta is missing, a documented Black–Scholes fallback is used and the source recorded. Because every derived metric traces back to stored raw inputs, a rank is reproducible.

Why these factors — the research

Selling cash-secured puts is often described as harvesting the volatility risk premium: index-level put-writing has a long, published track record, and the gap between implied and realized volatility is a documented, studied phenomenon. PutFinder does not claim to reproduce those results, and does not treat its own VRP reading as evidence of that premium — it is one minor input among several, alongside the stock's quality and trend; the references below describe the ideas the factors above lean on. The same premium-selling structure sits on the opposite side of a position in a covered call — see cash-secured put vs covered call.

• Cboe S&P 500 PutWrite Index (PUT) — a benchmark for systematically selling cash-secured puts: cboe.com/us/indices/dashboard/PUT.
• The Options Industry Council (OIC) — options basics, assignment, and the cash-secured put: optionseducation.org.
• Carr, P. & Wu, L. (2009). “Variance Risk Premiums.” The Review of Financial Studies 22(3): doi.org/10.1093/rfs/hhn038.

How it compares

A descriptive comparison of ways to find cash-secured-put setups — not a claim that one is “better,” just how they differ.

How are covered calls selected?

This comparison is for investors who already own shares and want to earn premium while aiming to keep them. We group contracts by delta and expiration window, then compare income, volatility compensation, and liquidity within each group.

Filter first, then group

Eligible contracts must have a strike above the current stock price, fall within the specified expiration window, meet the minimum open interest requirement, be quoted on both sides with the bid at or below the ask, carry a bid above zero, and stay within the bid–ask spread limit. The current thresholds appear with each analysis.

Contracts are divided into five delta bands, from 0.05–0.10 to 0.25–0.30, with a near-term and a longer-term expiration window in each band—ten cells in total. Each cell is ranked independently; there is no overall ranking across the ten cells. A higher delta means more premium and a higher model-estimated chance of assignment. Delta helps distinguish risk levels; it is not the exact probability that your shares will be called away.

Contracts expiring on or after the next earnings date in our records are excluded. If no earnings date is on file, no contracts are excluded on that basis, and the result says so. An unknown date does not mean there is no upcoming earnings announcement.

How are contracts ranked within a cell?

The main factor is premium income adjusted for time to expiration:

Time-adjusted income = (bid ÷ current stock price × 100) ÷ (days to expiration ÷ 30)^0.75

The bid is the price buyers currently quote. Using it is more conservative than assuming a fill at the bid–ask midpoint, but it does not guarantee an execution at that price. The formula produces a ranking metric, not an expected return.

Three additional factors contribute to the ranking:

Historical upside frequency describes past observations, not future probabilities. It does not capture intraday touches that disappeared by the close. Factor weights may change as the method is evaluated.

Why not simply choose the highest premium?

A higher premium often comes with a longer commitment, a closer strike, or greater volatility. Comparing dollar amounts alone can mistake compensation for those trade-offs for better value.

The time adjustment reduces the natural premium advantage of longer-dated contracts. For example, consider two contracts quoted at the same time, on the same stock, in the same delta band:

Contract B offers 40% more premium but requires a longer commitment. Contract A therefore ranks higher on the main income metric. The other factors also contribute to the final ranking.

We do not automatically reward a more distant strike, either. At a similar delta, a larger distance may reflect more time or higher volatility. Strike distance remains visible for your judgment; the ranking also considers historical upside frequency, which accounts for both distance and time.

Which figures are shown for context only?

Distance to the strike, upside forgone under a specified price-rise scenario, and arithmetic annualized premium yield do not directly contribute to the ranking. They help explain the trade-offs, not predict returns. An annualized figure does not mean the same premium can be earned repeatedly throughout the year.

What should I know before using the comparison?

The comparison assumes you own the corresponding 100 shares for each standard contract sold. PutFinder does not verify your holdings. Any uncovered portion is a naked short call and can expose you to unlimited losses.

Results are relative comparisons based on quoted prices at the time of analysis—not trade recommendations, guaranteed fills, or a strategy validated by historical performance. We do not check dividends or assess early-assignment risk; your shares may be called away before expiration. Displayed upside scenarios assume expiration and exclude early assignment, dividends, and your cost basis.

Long Call — how contracts are selected

The Long Call tab looks at call options 6 to 24 months out that behave much like owning the stock (a high delta), and lists up to three of them — one per expiration — ordered by yearly holding cost (what it costs to hold each one for 12 months). It describes contracts; it does not tell you to trade any of them.

Which expirations are considered?

There are three slots, with targets of about 6 months (182 days), 12 months (365 days) and 24 months (730 days). For each slot we take the listed expiration closest to the target, as long as it is within ±25% of the target and between 150 and 830 days away. If no expiration qualifies, that slot is left empty and the result says so. Each slot uses one option-chain request, so one analysis makes at most three.

Which contracts pass the filters?

Every call in the chosen expiration is checked against the rules below. A contract must pass all of them; the others are counted by reason, and a contract can fail more than one rule.

How are contracts ranked?

By one number, shown as “Cost / yr”: the cost of holding the contract for 12 months, as a percentage of the stock exposure it gives you. Two costs are counted — the time value the option is expected to lose over 12 months, and the bid–ask spread you give up getting in and out. The option is re-valued 12 months ahead with Black–Scholes, assuming the stock price stays where it is, the same implied volatility, and the interest rate implied by that expiration's own put and call prices.

Yearly holding cost = (time value lost over 12 months + bid–ask spread) ÷ (delta × stock price) × 100

Lower ranks first. Within one expiration, ties are broken by the smaller spread relative to time value, then higher open interest, then the lower strike, so the same quotes always give the same order. The contract ranked first in each expiration is the one shown in the table.

A worked example with real quotes (NVDA, 2026-09-30 10:24 ET, stock $231.12), for the 2028-12-15 $120 call:

Why do contracts lasting 12 months come first?

A contract that expires before the 12 months are up loses all of its time value by expiry, but that cost is spread over fewer days — so its percentage can look lower than a longer contract's even though it covers less of the year. To keep the comparison fair, contracts that last the full 12 months (allowing 30 days of slack) are listed first, ordered by holding cost; shorter ones follow, marked “< 12m”, with the number of days they actually cover.

Where do “Why this one” and the pros and cons come from?

They are generated by fixed rules from the same quotes — nothing is written by hand. “Why this one” compares the contract with the others that passed the filters in the same expiration: its holding cost against the next-lowest and the median, the trade-off against the adjacent strike, and where it sits against the other listed contracts. Pros and cons compare the listed contracts with each other (cash per contract, leverage, move to breakeven, spread, open interest, time to expiry) and add notes such as a delta of 0.80 or more, time value under 15% of the price, a spread above 10% of time value, open interest under 100, or implied volatility more than 5 points above 126-day realized volatility.

What are the limits?

• At most three contracts are shown — one per expiration slot — so this is not a full chain scan.
• The 12-month value is a model estimate that assumes an unchanged stock price and volatility; actual prices will differ.
• Trading volume is not shown: the option quote data this analysis reads does not include it.
• Breakeven is at expiry (strike + ask); delta is a model estimate of price sensitivity, not a probability.
• The ranking is a relative ordering of holding cost, not a forecast of returns and not investment advice.

Common questions

See today's ranked screen →

Last updated September 17, 2026.