Glossary
Cash-secured put
Selling a put option while holding enough cash to buy the shares if assigned, collecting premium in the meantime.
On this page
A cash-secured put is an options strategy in which you sell a put option and set aside enough cash to buy the underlying shares at the strike price if you are assigned. You collect the premium up front. If the stock stays above the strike, the put usually expires worthless and you keep the premium; if it falls below, you may end up buying 100 shares per contract at the strike. Because the cash is fully reserved, brokers typically allow it at a low options approval level.
How it works
Points to weigh
- Asymmetric payoff. Gains are capped at the premium; losses can approach the full reserved amount.
- Early assignment. American-style puts can be assigned before expiration, mainly when deep in the money.
- Opportunity cost. If the stock rallies hard, you earn only the premium.
- Interest. Many brokers pay interest on the reserved cash, adding to the return.
Some investors pair it with covered calls in a cycle often called the "wheel." The risk profile is similar to owning the stock outright with a covered call, not to holding cash.