Every market cycle creates its own fashionable investment strategy. During the technology bubble, it was buying companies with no earnings because someone else would eventually pay more. During the housing boom, it was flipping condos before the paint dried. More recently it has been chasing meme stocks, cryptocurrencies, and every company that sprinkles the letters AI into a press release.

Through all of those cycles, one strategy has quietly produced attractive returns while receiving remarkably little attention from Main Street financial media. It does not involve predicting interest rates, timing the market, or discovering the next revolutionary technology. It is simply selling cash secured put options on companies you already want to own.

That last phrase is the key. Most investors approach options backward. They begin by asking which options pay the highest premiums. That is exactly the wrong question.

A value investor should begin with a completely different question. What businesses would I happily own if they traded at a meaningful discount to their intrinsic value?

Once you answer that question, the options become nothing more than a tool for buying those businesses at even better prices while getting paid to wait.

I have often argued that investing begins with understanding risk. Every investment involves accepting uncertainty in exchange for the prospect of future returns. Bond investors accept credit risk and earn interest. Bank shareholders accept lending risk and collect dividends. Insurance companies accept catastrophe risk and collect premiums.

Selling cash secured puts is no different. You are simply accepting the risk that you may have to buy a stock you already wanted to own. In exchange, someone pays you an insurance premium.

That is not speculation. It is simply another form of underwriting risk.

Thinking Like an Insurance Company

One of the reasons I find this strategy so attractive is that it resembles businesses I have admired for decades.

Insurance companies make money because people consistently pay more for protection than the protection ultimately costs. Homeowners buy insurance hoping never to file a claim. Businesses insure factories they hope never burn down. Drivers insure automobiles they hope never wreck.

The insurance company collects thousands of premiums knowing that some claims will eventually occur. The business succeeds because the premiums collected exceed the claims paid over time.

Option markets work much the same way.

Investors routinely purchase put options because they fear losses. Hedge funds buy portfolio insurance before earnings announcements. Institutions hedge market exposure before elections, Federal Reserve meetings, or geopolitical events. Individual investors often buy puts simply because watching the financial news has convinced them disaster lurks around every corner.

Those investors willingly pay someone else to assume that risk.

The seller of the put option becomes the insurance company.

If the feared decline never materializes, the seller keeps the premium. If the stock falls below the agreed price, the seller buys shares at the predetermined strike price. That is why I insist on selling puts only on companies I already want to own. If I am assigned shares, I have simply completed a purchase I intended to make anyway.

Wall Street Has the Process Backward

Spend a few minutes reading options websites or watching television personalities discuss options strategies and you will notice a recurring theme. Everything revolves around maximizing premium income.

Investors are encouraged to screen for stocks with the highest implied volatility because those options produce the largest premiums. Lists of the “best put selling opportunities” almost always feature speculative biotechnology companies, heavily shorted meme stocks, distressed retailers, or businesses facing major uncertainty.

The premiums certainly look attractive.

Unfortunately, they look attractive for a reason.

The option market is remarkably efficient at pricing risk. High premiums usually reflect high uncertainty. Companies with unstable earnings, excessive leverage, regulatory challenges, or questionable business models naturally command richer option premiums because there is a greater probability that something unpleasant may happen.

Collecting a larger premium on a poor business rarely improves the investment.

Instead, it often increases the likelihood that you become the proud owner of a company you never should have purchased in the first place.

That approach turns investing into speculation.

A Graham-style investor should reverse the entire process.

Ignore the premium.

Find the business first.

Estimate intrinsic value.

Determine the price you would gladly pay.

Only then should you look at the option chain.

Benjamin Graham Would Have Understood This Immediately

Benjamin Graham never wrote extensively about listed equity options because modern listed options markets did not exist during much of his career. Nevertheless, the philosophy behind selling cash secured puts fits remarkably well within his framework.

Graham’s central idea was simple. Buy businesses for less than they are worth. Demand a significant margin of safety. Never overpay simply because everyone else is enthusiastic.

Suppose you determine that a bank is worth $40 per share. You decide that your required margin of safety means you will only purchase it at $30.

Most investors simply enter a limit order and wait.

A put seller can improve upon that process.

Rather than placing a standing buy order at $30, sell a $30 put option and collect a premium.

If the stock never reaches $30, you keep the premium. If it declines below $30 and you are assigned the shares, your effective purchase price may be closer to $28 or $29 after accounting for the option premium.

Either outcome is perfectly acceptable.

That is exactly how value investors should think.

The premium is not the investment.

The business is the investment.

The premium simply increases your expected return.

The Market Pays Investors to Be Patient

One of the greatest challenges facing investors is patience.

Everyone wants action. Financial television rewards activity. Brokerage firms reward activity. Internet commentators reward activity. Social media rewards activity.

Markets rarely reward activity.

Most fortunes have been built by investors willing to wait patiently for attractive prices.

Selling cash secured puts transforms patience into an income-producing asset.

Instead of watching a stock from the sidelines while waiting for a better entry point, investors collect option premiums during the waiting period. Every option that expires worthless becomes another payment for remaining disciplined.

Eventually one of two things happens.

Either the stock never reaches your desired purchase price and you continue collecting premiums.

Or the stock falls to a price where you already wanted to become an owner.

There are certainly worse outcomes than being forced to buy an undervalued company at an even lower effective price.

That is the kind of problem I do not mind having.

5 Candidates for a Cash Secured Put Strategy

Using the scanner tool in Benzinga Pro, I was able to quickly put together a list of five stocks that are optionable. These may be candidates for a cash secured put selling strategy.

Tenaris (NYSE:TS)

Tenaris is one of the world’s leading manufacturers of seamless steel pipe used in oil and natural gas drilling, pipeline construction, and industrial applications. While the energy sector remains cyclical, Tenaris has consistently distinguished itself through operational excellence, disciplined capital allocation, and one of the strongest balance sheets in the industry. The company carries minimal debt, generates substantial free cash flow, and has historically returned excess cash to shareholders through dividends and share repurchases.

Despite these strengths, shares continue to trade at valuation multiples that appear inexpensive relative to both the broader market and the company’s long-term earnings power. For value investors, Tenaris offers the rare combination of a fortress balance sheet, an essential business tied to global energy infrastructure, and liquid options that allow investors to generate additional income while waiting to buy shares at an even larger discount through cash-secured puts.

Hello Group (NASDAQ:MOMO)

Hello Group, formerly Momo, operates one of China’s largest mobile social networking and online dating platforms through the Momo and Tantan applications. Although investor sentiment toward Chinese internet companies remains cautious, the company continues to produce significant free cash flow while maintaining a substantial net cash position and regularly returning capital through aggressive share repurchases and dividends.

The market continues to assign a deeply discounted valuation because of concerns surrounding China’s economy and regulatory environment rather than any immediate balance sheet weakness. Investors willing to look beyond today’s headlines may find a profitable, cash-rich technology company trading at a significant discount to intrinsic value.

The stock’s active options market also makes it well suited for investors who prefer collecting option premiums while waiting for an attractive entry price.

Expand Energy (NASDAQ:EXE)

Expand Energy, created through the combination of Chesapeake Energy and Southwestern Energy, has become the largest independent natural gas producer in the United States. The merger created a company with enormous scale, a low-cost production base, and an inventory of premium drilling locations that should benefit from growing domestic electricity demand, LNG exports, and the rapid expansion of data centers.

Management has emphasized maintaining a conservative balance sheet while generating strong free cash flow across commodity price cycles. As natural gas demand continues to increase over the coming decade, Expand Energy is well positioned to benefit from both volume growth and improved pricing. Investors seeking exposure to this long-term energy theme can potentially improve their purchase price by selling cash-secured puts rather than chasing the stock after rallies.

Movado Group (NYSE:MOV)

Movado Group is a global designer, manufacturer, and marketer of watches and luxury accessories, selling products under the Movado brand as well as several licensed fashion labels. Consumer discretionary stocks have largely fallen out of favor amid concerns about slowing consumer spending, leaving Movado trading at what many deep value investors would consider an attractive valuation.

The company maintains a debt-free balance sheet, significant cash reserves, and a long history of generating positive cash flow despite the cyclical nature of the retail business. Management has demonstrated a commitment to returning capital through dividends and share repurchases while maintaining financial flexibility.

For patient investors willing to weather normal retail cycles, Movado offers the combination of balance sheet strength, low valuation, and sufficient options liquidity to implement a disciplined cash-secured put strategy.

Academy Sports and Outdoors (NASDAQ:ASO)

Academy Sports and Outdoors operates more than 300 sporting goods and outdoor recreation stores across the South and Midwest, serving customers with a broad assortment of hunting, fishing, camping, athletic apparel, and sporting equipment. The company has built a reputation for disciplined inventory management, strong free cash flow generation, and shareholder-friendly capital allocation through share repurchases and dividend growth.

Although investors remain concerned about slowing discretionary spending, Academy continues to generate healthy profitability while maintaining a solid balance sheet and expanding its store footprint into attractive new markets. The stock frequently screens as undervalued on traditional metrics such as earnings and free cash flow, making it an appealing candidate for value investors.

Its actively traded options provide an opportunity to collect premium while waiting to purchase shares at prices that offer an even greater margin of safety.