r/options
The "Canadian Put" — for those of us who can't sell puts in a retirement account
Explains the 'Canadian Put' strategy (buying shares + selling ITM calls) for retirement accounts banning put sales, using AAPL as example.
If you're Canadian and trade in a TFSA or RRSP(or an American like me who cant sell Puts in my retirement account), you already know the pain: no cash-secured Puts. The account just won't allow it. So if you want to run anything resembling the Wheel strategy, you're stuck.
The workaround is called the Canadian Put. The mechanics are simple:
Instead of selling a Put at your target strike, you:
- Buy 100 shares at the current price
- Immediately sell an ITM call at the strike where you would have sold the put
What's interesting is the Canadian Put often beats straight selling a Put on ARORC. Because you're selling an ITM call, the bid/ask spread is tighter and the time value is sometimes richer than what the equivalent put would fetch — especially on lower-IV tickers where the put chain is thin. Same risk, better return.
Example:
- $AAPL trading at $200
- You would have sold the $190 put for $3.00 (time value)
- Instead: buy 100 shares at $200, sell the $190 call
- $190 call trades at \~$13 ($10 intrinsic + $3 time value)
- Net cost basis: $200 - $13 = $187
- Same $3 of time value captured, same $190 effective entry if called away
The tradeoff vs. a real Put: you need to put up the full share price upfront instead of just the strike collateral, so it's more capital intensive. But for registered accounts it's the closest legal equivalent.
Anyone else running this? Curious what tickers/strikes people are targeting right now.
(I built a calculator to find good ARORC for the ticker you want to trade — happy to share this if there's interest and mods approve)
lowkey one of the more practical takes i've read on this topic in a while.
Removed for RULE: No promotions, referrals, or solicitations of any kind. No chat room links.
Posts and comments will be removed if they are mainly promotions of apps, websites, or content external to Reddiit (YouTube, TikTok), or are solicitations of any kind, including requests for feedback, or for members for a group or survey, or are referrals to Discord or Telegram.
This rule applies even if the thing being promoted is offered for free. Developers of free apps or websites that may be useful to options traders should contact mods for pre-approval before posting.
Marketing advertising can be purchased from Reddit at http://reddit.com/advertising.
The structure is worth comparing, but I would be careful calling it a put replacement without modeling early assignment, dividends, borrow/financing assumptions, and tax/account rules.
A covered call and a cash-secured put can have similar payoff diagrams, but account treatment, execution price, spreads, and assignment mechanics can differ. The right comparison is net risk, capital used, after-tax return, and what happens on a gap through the strike.
Same risk, better return is not correct. What you're describing is arbitrage. I've seen a legit arbitrage once in my 20 years of trading and it didn't stick around that long. You're talking about a persistent ever present arbitrage. If it was there, why wouldn't everyone be selling the better one and buying the worse one to lock in the profit?
This is less of an attack and more of an encouragement to think about why it's not better, and why it's not arbitrage.
Thoughts:
\* As OP mentioned, if the spreads are better for ITM calls it could be better, but I don’t usually run into better spreads on ITM. Usually as premium increases, spread increases.
\* When selling a put, you get to earn interest on the margin balance, something like 4-5% with a good broker/cash management/margin to buy money markets etc. By taking the call side, you are selling that 4-5% to the option buyer.
Against:
\* Dividends will decrease the value of calls and increase the value of puts, which should make put premium richer on a dividend paying stock.
\* To hedge a sold put, you need to short stock, and that has a borrow cost, increasing premium on puts.
Solid work. Once you account for all the borrowing/interest costs, the risk reward is identical. The wider spreads thing is only on paper. Spreads always make a difference but those spreads are grossly misstated. Actual fill prices for a buy and sell are very close, maybe $.20 for very illiquid stuff.
WS allows CSPs on RRSP and TFSA.
I wheel in registered. Just need the cash for the shares upfront so it’s just as intensive but executed cleaner.
Same with Questrade.
True. I still have some CSPs and long calls there so I can't move all my assets to WS.
ah ok so not in RESPs and also seems some possible tax issues in other accounts.
Interesting.
Its legally available in the US but the firm I have one of my retirement accounts with wont allow it. 😞
What do you mean you can't sell puts in a retirement account? I sell puts in my TFSA all the time
It appears that some brokerages let you do it an others don’t. Even in the US as I mentioned in another comment.
Im in TDDI and cant sell puts in my registered
Can you trade spreads?
If so, trade a short put with a long wing at literally the farthest strike with a bid on it.
Nope, can't trade spreads in Canadian registered accounts :(
Or just buy an inverse ETF.
They’re looking for long exposure, short volatility. An inverse ETF is short exposure
I laughed at "tundra land regulators."
Its the same risk profile but takes way more buying power. How is it superior to CSP?
In Canada, the positions would take the same buying power since retirement accounts don't allow lending in registered accounts. And they're also the same buying power in margin accounts.
It isn't superior as OP stated though due to added commission fees.
The inverse is also true: an ITM put is the same as a covered call. Never would have thought about the same for puts, and I'm Canadian and had no idea about this restriction.