Cash-Secured Put
Selling a put while setting aside enough cash to buy the shares if assigned — collecting premium with the willingness to own the stock at the strike.
Formula
Effective Purchase Price = Strike − Premium Received | Max Profit = Premium Received
A cash-secured put is an income strategy in which a trader sells (writes) a put option and simultaneously holds enough cash to purchase 100 shares per contract at the strike price if assigned. The premium collected is kept regardless of outcome.
It expresses a willingness to buy the underlying at a discount: if the stock stays above the strike, the put expires worthless and the seller keeps the full premium as yield on the reserved cash. If the stock falls below the strike, the seller is assigned and buys the shares — but at an effective cost of the strike minus the premium received, below where the stock traded when the position was opened.
The risk is real but defined relative to ownership: the maximum loss is the same as simply buying the stock at the effective price and watching it fall toward zero. Because the position is fully cash-backed, it carries none of the unlimited assignment exposure of a naked put. It is often paired with the covered call as the two halves of the wheel strategy.
Example
With XYZ at $52, you sell a 30-day $50 put for $2.00 and set aside $5,000. If XYZ stays above $50, you keep the $200 premium (a 4% return on reserved cash in one month). If assigned, you buy 100 shares at an effective $50 − $2 = $48 each.
Related Terms
Assignment
The process by which an option seller is required to fulfil their obligation — delivering or buying the underlying — when the buyer exercises.
IntermediateCovered Call
An options strategy where the holder of a long stock position sells a call option against it, generating income at the cost of capping upside.
IntermediatePremium
The price paid by the option buyer to the option seller for the rights granted by the contract.
IntermediatePut Option
An options contract giving the buyer the right to sell the underlying asset at the strike price before or on expiration.
BeginnerStrike Price
The fixed price at which the option holder can buy (call) or sell (put) the underlying asset if they choose to exercise.
Beginner