A cash-secured put means selling a put option while keeping enough cash aside to buy the shares if you are assigned. It is a way to set a lower buying price for a stock you already want, and get paid while you wait.
Example
A stock trades at 1,000. You would happily buy it at 950. You sell the 950 put for a premium of 15 and set aside the cash for one lot at 950.
- Stock stays above 950: the put expires worthless and you keep the 15 premium.
- Stock falls below 950: you buy the shares at 950, and your real cost is 935 after the premium.
Risks to respect
- If the stock collapses, you still buy at 950. The premium only softens the loss.
- You miss out if the stock rallies strongly, since your profit is capped at the premium.
- Only sell puts on companies you would genuinely want to own at that price.
Many traders combine the two ideas: sell cash-secured puts until assigned, then sell covered calls on the shares. This is often called the wheel strategy.
This article is for education only and is not financial advice. Options involve risk and are not suitable for every investor.