What is a Cash Secured Put?

A cash secured put is an options strategy where you sell a put option while holding enough cash to buy the stock if assigned. You get paid premium upfront for agreeing to potentially buy shares at the strike price.

How Cash Secured Puts Work

  • You want to buy a stock at a lower price
  • Sell a put option at your target purchase price
  • Hold cash equal to strike price × 100
  • Collect premium immediately

    • If stock stays above strike: Keep premium, obligation expires If stock drops below strike: Buy shares at strike (minus premium received)

    Example: AAPL Cash Secured Put

    You want to buy AAPL, currently at $230, but would prefer $220:

  • Sell $220 put expiring in 30 days
  • Premium received: $3.50 per share ($350 total)
  • Cash required: $22,000

    • Scenario 1: AAPL stays above $220

  • Keep $350 premium (1.6% return in 30 days)
  • Annualized: 19.2%

    • Scenario 2: AAPL drops to $210

  • Buy 100 shares at $220
  • Effective price: $220 - $3.50 = $216.50
  • You got a discount vs. buying at $230!

    • Why Sell Cash Secured Puts?

  • Get paid to wait for stocks at your price
  • Lower your cost basis via premium
  • Defined risk - you know exact buy price
  • Works in any market condition