Treasury Secured Puts (TSPs)

Hear me out … :wink:

A colleague of mine recently made me aware of his “enhanced” Cash Secured Puts (CSP) approach which I am calling Treasury Secured Puts (TSP).

As with CSPs you sell Puts for securities you’re actually fine with being delivered at their strike. Instead of backing them with cash, you back them with US Treasuries.

If the Put doesn’t get assigned, you’ve not only pocketed the Put premium but all the capital gain of the treasury accumulated over that time (plus the acrued interest – or actual interest payments – from the bond).

If the Put does get assigned, your treasury is about as liquid as it gets* and you sell bonds to finance being assigned on the Put. As above, you’ve additionally profited on the capital gain of the bond plus actual and/or accrued interest.


  • You sell a Sept 24 55P for ADM on bad news in April 24 for $166.05.
    This is equivalent to an annualized return of 6.84% on your cash (notably also above the dividend yield if you bought ADM outright at the price it was trading at in April).
  • You need $5.5k to back that Put in case it gets assigned. With CSPs, you’d have that cash ready and sitting in your brokerage account.
  • Instead of sitting on that cash you now buy treasuries for 5.5k, currently yielding a little of 5%.
  • If you get assigned on your Put before or at expiry, you sell your treasuries to finance the assignment. You will then additionally profit from the capital gain on your treasury plus any accrued or actual interest (again a little over 5% annualized).
  • If you don’t get assigned, you sell your next suitable Put under your treasury umbrella.

Extra notes:

  • when picking a bond at your desired maturity date, pick one that has a low coupon as you’ll pay taxes on interest paid out (but – as a Swiss resident – no taxes on the capital gains of your bond)
  • you can convert your CSPs into TSPs by buying treasuries at a later point in time with the cash that you set aside when selling the Put for the original CSP
    I’ve for example only this week converted all my CSPs at IBKR into TSPs by buying Notes with a coupon of 0.25% maturing on May 31’25 (CUSIP 912828ZT0) yielding around 5.2%
  • if you have a broker like IBKR you actually get reasonable interest – a little lower than treasuries, though, since they want a cut, too! :slight_smile: – on your cash that you reserve for CSPs, but you’ll pay full income tax on that cash interest (versus mostly untaxed capital gain on your treasuries backing the TSPs)
  • IIRC you get no interest on the first $10k of cash at IBKR. With a TSP approach you can put most of that $10k to work with a yield of currently about 5%


  • probably only really useful at a low fees broker (like IBKR) in order to avoid lots of trading fees:
    • in the “best” case – Put expires worthless – you’ll do one trade with a CSP (selling the Put) while you’ll do at least two trades with a TSP (additionally buying the treasuries)
    • in the “worst” case – Put gets assigned – you’ll trade still only trade once** with a CSP while you’ll do three trades with a TSP (additionally initially buying the treasuries and on assignment then selling the treasuries)
  • obviously you need a broker where you can trade US Treasuries
  • if the Fed raises rates, the price of your bond will sink (you’ve locked in your bond return at purchase time assuming you’ll hold your bond till maturity)
  • if the price of your bond sinks at the time you get assigned your Put, your treasuries might not fully cover the lot you get assigned, so probably useful to still have a little cash on the side or have your treasury umbrella a little larger than the potential commitment of your Put(s))
  • the entire TSP approach is only attractive in a high interest rate environment (as we’re currently experiencing with US Treasuries)

* Ok, ok, cash is even more liquid.

** Unless you’re unlucky and your broker is Swissquote where the assignment is treated as a purchase: you’ll pay the full trading fees as if you bought the underlying; to add injury to insult, Swissquote won’t apply any trading flat fees you might have purchased to do that “assignment”/purchase trade.


I think you need to sell treasury before maturity otherwise it’s taxed as income, no? If that’s the case, will tax office be happy with such frequent behavior?
Also can’t recall where I read, but to liquidate treasuries you can only at sub par prices, but probably better than being hit by income tax.

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What will you get if the ADM (Archer-Daniels-Midland Company?) price goes down? Let’s say 0 to make it easy.

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I used to speculate gamble with selling options with some small money. Bottom-line I made some gains because of me being a gifted investor luck.

Main caveat for me, whether cash or treasury backed is that selling them is a sucker’s game, eventually. Less volatile stocks will only get you peanuts and risky ones are, well, risky.
My experience is, simplified, you collect the fees 9 out of 10 cases (high possibility, small upside), and then get burned the 10th time (low possibility, high downside).

Sounds more exiting the other way around :wink:


I don’t know really, I’ll find out next year when I file my taxes. :tada:

That said, I think there’s different types of bonds that are taxed differently.

One the one end you have so called Zerobonds (no coupons, sold sub par and the entire “interest” is due to the Zerobonds being sold sub par at emission time). The “capital gain” from sub par purchase price to redemption at maturity would IMO be taxed as income as you describe.
The entire concept looks to me like a failed attempt to avoid income tax.

On the other end you have bonds that are sold at par or at least near par.
US Treasuries are auctioned off and at emission time are afaik rather close to par (occasionaly slightly below sometimes even slightly above par?) and most of your income – looking at expected income at emission time, if rates never changed – would be from coupon income.
You’d only pay income tax on the coupons for these types of bonds, not on capital appreciation or depreciation due to interest rate changes.

There’s probably bond like securities that implement capital gain vs coupon payouts in between those two examples, and if I read this (“Besteuerung von Obligationen, Derivaten und kombinierten Produkten, März 2023”) correctly (admittedly I only skimmed it), at least half of your profit would need to come from the Zerobond type category – again looking at things from the emission point in time – in order for your profits to be taxed as income.

Hope is not a strategy, but the colleague of mine who introduced me to TSPs believes that for US Treasuries you’re only taxed on coupons/interest, and this colleague’s dad was a Steuerkommissär for the canton of Zurich. I don’t know any further details, but I’m fairly confident that my colleague has checked things with his dad, and that things are probably kosher.

I’ll find out next year. :star_struck:

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Not entirely sure I fully understand your question …?

The formal answer is that I lose about $5260:

  • I’ll get assigned 100 ADM – indeed Archer-Daniels-Midland – for a total of $5500.
  • If ADM is worth 0 at that point in time (before or at expiry on the third Friday in September), the 100 shares of ADM that I just got assigned will be worth 0 even if they were assigned to me for the price of $55 each. With a total of 100 shares for the option, the assignment will cost me $5500.
  • I will have lost $5500 minus my option premium of about $166 and minus the capital apreciation and interest payments or accrued interest of my bond of about 5% anually, i.e. $275 for an entire year or about 75 cents for every day I held the treasury as collateral for the sold Put.
  • So, a total loss of $5500-$166-(number of days I held the treasury as collateral x $0.75), I guess maybe $5500-$166-(100 x $0.75) = $5260.

Allow me on the other hand to calculate things for where we stand today with the price of ADM at $61.27.

  • I received $166 for selling the option in April ($1.66, contract size 100)
  • I could have bought back the option yesterday for about $97 ($0.97, contract size 100)
  • I would then have made a profit of about $70 on this trade.

To be clear, I will hold on to this sold option either until I get ADM assigned (I’ll buy 100 of them for $5500 in total) whatever the market price for ADM at that time or until the remaining value of my option is so cheap that I feel it’s not worth holding onto it until it expires (e.g. say it’s worth $10 2 months before it expires).

Maybe I misunderstood your question?


As you state yourself, your comment (I think) isn’t related to TSP vs CSP but towards option selling in general.
I appreciate your view, but I’d also answer generally on doing Stillhaltergeschäfte versus the benefits or drawdowns on doing CSPs versus TSPs.

See, that’s where we differ: I invest with selling options and I make gains because I am a gifted investor.


Totally just kidding!

Hey, market gods, I was really just only kidding, please don’t punish me for this folly quipping, I was just trying to be entertaining on this forum on a Saturday night! Honest to Market Gods, I wasn’t serious.

My experience is different. I’ve sold close to 200 Puts for a profit of about $26.6k* since I started in 2020,
Collected premiums of about $36k, bought back for about $9k, got assigned on … hm, I think I can count them with one hand (and happy with all those assignments)?

I get your point about premiums for less volatile and risky ones, but from a seller’s perspective, that’s IMO the entire point of why I want to participate in this game: I don’t sell Puts (“insurance for the buyer’s fear”) on low volatile price action, I sell them on companies I want to own anyway when everyone shits their pants because XYZ headline worthy but business bottomline probably not that relevant just happened, when the delta is high and the options sell like pancakes.

My approach is thus:

  • I only sell Puts at strikes where I am comfortable buying/owning the company.
    Rather hard rule, so far I haven’t rolled any of my sold Puts.
  • I only sell Puts that yield always above the dividend yield of the underlying, ideally far above it.
    Hard rule. Why would I want to cash in on option premiums only if I can collect equal dividends and participate in the company’s growth?
  • I hope to avoid the “low possibility, high downside” experience that you got burned on, although I’m not sure I correctly interpreted this: are you referring to options you sold at X but had to buy buy at 10X to cut your losses? Or something entirely different?

At any rate, I appreciate your perspective and would commend you on your approach: it’s best to test the boundaries of your comfort zone, but it’s smart to stay inside it if your trades work against you.

And option … ahem, trading … is really just trading, not investing, at least in my book. :slight_smile:

* Slightly exceeding financing my trading fees with Swissquote over that time period.
Since starting trading only at IBKR my behavior might change.

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Agree on bonds is issued below par or in combination of discount and coupon.
However this document explains differently standard bonds, unless I read it wrong -

Or do they mean “last payment accrued interest” part is taxable, while “last payment capital gain” part is not, same as “accrued interest upon sale”?

Also, this works well with bonds issues at low coupon but now being in red due to interest rise.
I don’t like to keep bond in long maturity and prefer sort of ladder. Need to look for suitable candidates in this sense.

Finally, I assume you don’t fret about professional trader status and did sell puts since 2020. Do you put all transactions to tax declaration? Somebody on forum stated they you don’t unless they carry over in next year and should be declared as overall wealth.

Not too different :laughing:. Sure you can earn some money, but it’s pocket money compared to total amounts involved. You provide your own example above in response to Helix’s (rhetorical?) question.

If you intend to buy the stock in your example, you’d have to buy it for 55, even if you could get it for 40 if the price dropped in the meantime. Or it’s going up to 90, and you missed the chance to buy at the current level. I understand you are well aware of that.

Correct, that was a general comment. It’s not my intention to derail this specific discussion of treasury-backed vs. cash-backed with a discussion on option selling. Just wanted to add for others that there’s no (risk-)free money to be made by it :wink:

If you go for it, seems the TSPs could optimize it a little bit thanks to higher returns and some tax effect.

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Frankly, I think this is confusingly formuated by Thierry De Mitri … maybe on purpose as their business is tax advising? Honi soit qui mal y pense …

These are the relevant passages from your quote above:

What Uncle Sam will pay me at the May 31 2025 maturity of my treasury note is the principal aka nominal aka par value of the bond plus the final interest due on May 31 2025.
I’ll pay income tax on that final interest payout of 0.25% but certainly not on the nominal.

That third quoted sentence above is particularly confusing, as it kind of implies that “the reimbursement” is the debtor paying back the principal at maturity and that this is taxable, while in fact it’s only any reimbursement above the principal that would be taxable, i.e. the final interest payment.

Anything else wouldn’t really make any sense, would it? Think about it: you lend someone money (let’s say no interest, it’s your friend). They pay back that money to you. That’s not income, is it?

No, doesn’t worry me. I carry only few Put positions over the year end to avoid suspicion and it works out fine. See this post for a more detailed discussion.

It is not to avoid income tax (and obviously it doesn’t). The point of zeros is to avoid re-investment risk.

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