# Selling Far-OTM Puts for 'Safe' Income Is a Myth Source: https://theoptionsbench.com/selling-far-otm-puts-for-income/ > Plain-text mirror for AI/LLM ingestion. Canonical HTML page: https://theoptionsbench.com/selling-far-otm-puts-for-income/ --- Updated 3 September 2026 ยท by Theo Chen The pitch is seductive: sell a put so far out of the money it almost never gets hit, pocket the premium, repeat - "safe" income with a 90-95% win rate. It is the most popular cash-secured put idea on retail forums, and on real data **it is a trap.** Over 14 years of actual SPY option fills, the far-out-of-the-money 10-delta put made just **1.31% a year** - barely above cash before the interest this backtest leaves idle - and in the one crash that mattered it lost _more_ than selling at the money. Its 95% win rate hides a near-zero return. This is not a model. We ran the same monthly cash-secured put on **real OptionsDX end-of-day SPY option chains, 2010-2023** (163 cycles): at each roll we pick the put whose _actual_ delta is closest to the target and sell it at the real bid/ask mid, fully cash-secured, held to expiration. Here is every strike, same window, same rules. | Put strike (real fills) | Return / yr | $100k became | Win rate | 2020 | | 10-delta (far OTM - the "safe" strike) | 1.31% | $119k | 95.1% | -19.8% | | 20-delta | 2.41% | $138k | 90.2% | -17.2% | | 30-delta (the income strike) | 3.51% | $160k | 84.7% | -13.5% | | 50-delta (at-the-money) | 6.03% | $222k | 77.3% | -6.1% | | Buy & hold SPY (total return) | 12.66% | $525k | - | - | Real OptionsDX SPY fills, 2010-01-15 to 2023-12-15, sold at the bid/ask mid with strikes chosen by actual delta; collateral held fully in cash, idle. "Win rate" = the share of cycles that **ended in profit** - the premium covered any assignment loss. That is not the same as expiring worthless: near the money a put can be assigned and still pay, so the expired-worthless share is lower. ## The win rate is a magic trick Look at the 10-delta row again: it won **95% of its months** - it came out ahead almost every single time - and still turned $100k into only $119k over 14 years. How? The premium was so thin that the handful of months it _did_ get assigned, deep below the strike, gave back most of what the winners ever collected. Many tiny wins, a few real losses, a near-zero net. You collect a fraction of a percent a month to stand in front of a 25% hit - win ninety-five of those and lose five, and the five still own you. That is the whole illusion in one line: **win rate measures how often you win, not how much.** A 95% win rate on pennies loses to a 77% win rate on real premium - which is exactly what the at-the-money strike did, compounding 6.03% a year ($222k), about 4.6 times the far-OTM return, off nothing but a different strike. ## The crash inverts the whole pitch "Far-OTM is safer" should at least hold up when the market falls apart. It does the opposite. Here is 2020 - a sharp crash and a fast recovery, the worst case for any option seller - by strike, from the same real fills: | Put strike | 2020 return (real fills) | | 10-delta (far OTM "safe") | -19.8% | | 20-delta | -17.2% | | 30-delta (income) | -13.5% | | 50-delta (at-the-money) | -6.1% | The "safe" strike lost the most. The mechanism is simple once you see it. The 10-delta seller collected a few cents, then watched SPY fall roughly a third _straight through_ the strike - the premium cushioned almost nothing, so the loss was nearly the full move. Worse, there was no fat premium to rebuild with: after the crash, volatility stayed high for months, and the at-the-money seller banked rich premium every cycle that clawed most of the loss back (-6.1% on the year). The 10-delta, collecting pennies, could not - it finished -19.8%. The at-the-money put even took the _deeper_ single-month hit in March (-29.6% versus -25.1% far OTM), yet still finished the year far ahead - the premium that cushions the blow is the same premium that funds the recovery. So far-OTM is the **worst of both worlds**: the least income in the calm years, and - when it finally matters - a bigger hole than the strike everyone calls "risky," with no premium left to climb out of it. **The premium you skip is the cushion you don't have.** ## It is not an SPY fluke The same shape shows up on QQQ over 12 years (2012-2023): the far-OTM 10-delta made 2.42% a year to the at-the-money strike's 7.82%, and in 2020 the 10-delta lost 11.1% while at-the-money actually finished +4.9%. Two underlyings, two windows, one conclusion: the closer to the money you sell, the more you make, and far-OTM is not the safe harbor it looks like. ## Why the myth is so sticky It survives because it is built to feel right. A 95% win rate produces a long, smooth string of green months, so it _feels_ safe and consistent - right up until the rare month that erases a year of them. The losses are infrequent and lumpy, so they never make it into the screenshots. And "10-delta = ~90% chance it expires worthless" gets mistaken for "~90% chance the trade is a good idea," which is a different claim entirely. The probability of keeping the premium is high; the _amount_ is tiny and the tail is real. ## What to do instead Selling cash-secured puts is a perfectly good income trade - just not at the strike most people reach for. The real fills point one way: - Sell the income strike, around 30-delta - meaningful premium without going all the way at-the-money. It carried its weight (3.51% a year) where far-OTM did not. The wrong reason to pick a strike is "it almost never gets hit"; the right one is "the premium actually pays me for the risk." - Only on a stock or ETF you would genuinely be happy to own at the strike. The premium is a bonus for taking a position you wanted anyway - not a reason to sell on a name you would never hold. - When the premium is genuinely rich, not just present. Check it with the IV rank calculator - high IV rank is when selling pays. - Sized to a real dollar yield. Run the trade through the cash-secured put calculator: if the annualized return on capital is low single digits with a huge cushion, you are in the 10-delta trap. The one rule that falls out of the data: **never sell the far-OTM "safe" strike for income.** It is the one that barely beat cash, before the interest this backtest leaves idle, and got hit hardest in the crash. Safety in put-selling comes from the stock you choose and the size you take - not from a strike so far away it pays you nothing to stand in front of the same risk. ## Caveats - read these - Idle collateral. The backtest leaves the cash collateral earning nothing, so the 10-delta's 1.31% is mostly premium on top of idle cash. Parking that cash in T-bills would lift every strike - but equally, so the gap between far-OTM and the income strike, and the crash result, is unchanged. - One window. 2010-2023 on real option data (it covers the 2020 crash but not 2008). The longer, modeled record in the full backtest tells the same story. - Mechanical rules. Hold-to-expiration, no rolling, no profit-taking, no dodging earnings. Active management changes the numbers - but does not turn thin premium into a cushion. - Educational, not advice. Past performance is not predictive. Source: real OptionsDX end-of-day SPY and QQQ option chains (2010-01-15 to 2023-12-15), sold at the bid/ask mid with strikes chosen by actual delta, fully cash-secured and held to expiration. Every figure regenerates from the data; none are hand-entered. For the full strike ladder, equity curves and the 19-year picture, see cash-secured puts vs buy-and-hold. The results behind both pages sit alongside every other backtest on this site at /data/, published as JSON and CSV under CC BY 4.0. Cite this study Theo Chen. Cash-Secured Puts vs Buy-and-Hold: Yearly Returns. The Options Bench, 2026. https://theoptionsbench.com/selling-far-otm-puts-for-income/. Licensed under CC BY 4.0. Download the underlying data: JSON CSV The bottom line On 14 years of real SPY fills, the far-OTM 10-delta "safe" cash-secured put won 95% of its months but made just 1.31% a year - barely above cash, before the interest this backtest leaves idle - and lost 19.8% in the 2020 crash, more than an at-the-money put. Thin premium is no cushion. The win rate hides a near-zero return; if you sell puts, sell the income strike (~30-delta), not the far-OTM one. ## Frequently asked questions Are far-OTM (low-delta) cash-secured puts safe? Not in the way the pitch implies. On real SPY option fills (2010-2023), the far-out-of-the-money 10-delta put won 95% of its months but compounded just 1.31% a year - barely above cash, before the interest this backtest leaves idle - and in the 2020 crash it lost 19.8%, more than the 6.1% an at-the-money put lost. The thin premium gives almost no cushion when a drop blows through the strike, and never adds up to much when it doesn't. Why did far-OTM puts lose more than at-the-money in the 2020 crash? Premium is the cushion. The 10-delta seller collected a few cents, so when SPY fell roughly a third straight through the strike the loss was nearly the full move - and there was no fat premium to rebuild with afterward. The at-the-money seller collected rich premium (richest exactly when volatility spiked), which absorbed much of the drop and clawed the rest back over the following high-IV months, finishing the year at -6.1% versus -19.8% for the far-OTM strike. Does a 95% win rate mean the strategy is safe? No - win rate measures how often you win, not how much. The 10-delta put ended 95% of its months in profit yet turned $100k into only $119k over 14 years, because the rare assigned months gave back most of those small wins. A high win rate with a thin net still nets near zero. What delta should I sell cash-secured puts at instead? Strike selection is the biggest lever, and far-OTM is the wrong end of it. The same real fills show returns rising monotonically toward the money: 1.31% at 10-delta, 3.51% at 30-delta, 6.03% at-the-money. The 30-delta "income strike" is the usual sweet spot - meaningful premium without selling at-the-money - on a stock you would be happy to own, when implied volatility is genuinely rich. Is this just an SPY quirk? No - it repeats on QQQ over 12 years (2012-2023): the far-OTM 10-delta made 2.42% a year versus 7.82% at-the-money, and in 2020 the 10-delta lost 11.1% while the at-the-money strike actually finished +4.9%. Two underlyings, same shape. ## Related questions - Do cash-secured puts beat buy-and-hold? (full 19-year backtest) - How do I choose a strike price? - When is implied volatility actually high?