Trading term
What is Cash-secured put?
A cash-secured put is an options strategy where you sell a put option while setting aside enough cash to buy the stock if you're assigned. You collect the premium as income; in exchange, you agree to buy the stock at the strike if it falls there. It's a way to get paid to buy a stock you want at a lower price.
You sell a put — usually below the current price — and hold the cash to honour it. If the stock stays above the strike, the put expires worthless and you keep the premium as pure income. If the stock falls below the strike, you're assigned: you buy the 100 shares at the strike (using your set-aside cash), but your effective purchase price is lowered by the premium you collected. Either way you got paid for the agreement.
The strategy suits investors who'd be happy to own a stock, just at a cheaper price. It's the mirror of the covered call: instead of getting paid to sell shares higher, you get paid to buy them lower. The 'cash-secured' part is the discipline — the cash is reserved, so there's no leverage or margin surprise. The risk is that the stock keeps falling well below the strike: you're obligated to buy at the strike while the market trades lower, so you take the loss on the shares (cushioned by the premium), just like any stock owner would.
You sell a $50 put for $2 and hold the cash. Above $50 you keep the premium; below it you buy the shares at an effective $48 — the mirror of a covered call.
For example
A stock trades at $52 and you sell a $50 put for $2 ($200), holding $5,000 in cash. If it stays above $50, you keep the $200. If it drops to $45, you buy 100 shares at $50 — but with the $2 premium, your effective cost is $48, better than buying at $52 earlier.
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Explore Premium →Why it matters to you
A cash-secured put turns 'I'd buy that stock if it got cheaper' into an income-generating plan: you're paid to wait, and if you're assigned you get the stock at a discount to today's price. It's a favourite of value-minded investors for entering positions with a built-in margin and a premium cushion.
⚠ You must want to own the stock
The danger is selling puts purely for the premium on a stock you don't actually want. If it craters, you're forced to buy at the strike while the market trades far lower, taking a real loss. A cash-secured put is only 'safe' if you'd genuinely be happy owning the shares at the strike — treat assignment as the plan, not an accident.