Trading Strategies
What is Cash-Secured Put?
Selling a put option while holding enough cash to buy shares if assigned.
📖 Complete Definition
A cash-secured put involves selling a put option while holding enough cash to purchase 100 shares at the strike price if assigned. This generates premium income and potentially allows you to buy stock at a discount. It's the foundation of the "wheel strategy" and is popular among income-focused traders looking to accumulate shares.
💡 Examples
- →Sell a $95 put on a $100 stock, collect $2.50 premium ($250)
- →If assigned, effective purchase price is $95 - $2.50 = $92.50 per share
❓ Frequently Asked Questions
What happens if the put is assigned?
You'll be required to buy 100 shares at the strike price. With the premium collected, your effective cost basis is lower. Many traders are happy to own shares at a discount.
🔗 Related Terms
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