A cash secured put is an options strategy where you sell a put option and set aside enough cash to buy 100 shares of the stock if the buyer exercises that put. You collect premium upfront, and in return, you agree to purchase the stock at the strike price if it drops below that level by expiration.

Breaking It Down With a Real Example

Say Apple is trading at $195. You wouldn't mind owning it at $185. Here's what you do:

  • Sell 1 AAPL $185 put expiring in 30 days
  • Collect $2.50 in premium ($250 total)
  • Set aside $18,500 in cash (the "cash secured" part)

    • Two things can happen at expiration:

    AAPL stays above $185: The put expires worthless. You keep the $250 premium. Your $18,500 cash is released. That's a 1.35% return in 30 days — roughly 16% annualized.

    AAPL drops below $185: You buy 100 shares at $185. But you collected $2.50 in premium, so your real cost basis is $182.50. You got Apple at a 6.4% discount from where it was trading.

    Why Traders Love This Strategy

    The appeal is straightforward. You get paid to wait for a stock price you already want. Compare that to placing a limit buy order at $185 — you'd wait for free with no premium. Selling a put pays you for your patience.

    Three reasons this strategy works well:

  • Income generation: Collect premium whether or not you end up buying stock
  • Built-in discount: Your effective purchase price is always below the strike
  • Defined risk: You know exactly the maximum you could spend — the strike price times 100, minus premium

    • The "Cash Secured" Part Matters

    The word "cash secured" means your broker holds enough cash in your account to cover the full purchase. This is different from selling puts on margin, where you only need a fraction of the capital. Cash secured puts are conservative — you're never leveraged beyond your means.

    Most brokers require this for basic options accounts. You don't need fancy margin approval.

    Who Should Use Cash Secured Puts?

    This strategy fits you if:

  • You want to buy a stock but at a lower price than today
  • You're comfortable owning the stock if assigned
  • You want to generate income on idle cash sitting in your account
  • You have at least enough capital to buy 100 shares

    • It's not a good fit if you have no interest in actually owning the stock. Never sell a put on something you wouldn't buy.

    Common Misconceptions

    "It's free money." Not quite. If the stock crashes 40%, you're buying at the strike and sitting on a big unrealized loss. The premium softens the blow but doesn't eliminate risk.

    "It's the same as buying stock." No — you only buy if the stock drops to your strike. If it rockets higher, you miss the move and only keep the premium.

    "You need a lot of money." For high-priced stocks, yes. But stocks like Ford ($12), Palantir ($25), or SoFi ($14) let you sell cash secured puts with $1,200 to $2,500 in capital.

    Getting Started

    Pick a stock you genuinely want to own. Look at a strike price 5-10% below the current price. Sell a put 30-45 days out. Collect premium. Wait. That's the entire strategy. OptionsPilot's strike finder can help you identify which strike prices offer the best premium relative to risk for any stock on your watchlist.