⚠️ Options involve significant risk and are not suitable for all investors. Before trading options, read the OCC Characteristics and Risks of Standardized Options. Educational only; not investment advice. Examples ignore commissions, taxes, and early assignment.

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Cash-Secured Put

Sell a put and set aside enough cash to buy 100 shares at the strike if assigned. You get paid to wait to buy a stock at a lower price.

New to this? Selling a put means you agree to buy 100 shares at the strike if the buyer asks. "Cash-secured" means you keep enough cash in the account to pay for them. Unfamiliar word? See the options glossary.

Watch: Cash-Secured Put Explained

Payoff at expiration

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When traders use it

You would happily own the stock at the strike price.

Formulas (per share; ×100 per contract)

Max profit	P (premium)
Max loss	K − P (stock to zero)
Breakeven	K − P

Key risks

You may be assigned shares in a falling market; cash is tied up; profit is capped at the premium.

How it works

You sell one put option and keep enough cash to buy 100 shares at the strike. You receive the premium up front. If the stock is above the strike at expiration, the put expires worthless and you keep the premium. If below, you are assigned and buy 100 shares at the strike; your effective cost is strike − premium.

Worked example HYPOTHETICAL

Hypothetical example only — not real prices or a recommendation. Stock at $100. Sell 1 put, 30 days, $95 strike, for $2.00 ($200 received). Set aside $9,500 cash.

Stock price at expiration	P/L (1 contract, excl. fees)
$75	−$1,800
$90	−$300
$93	$0
$95	+$200
$100	+$200
$110	+$200

Market outlook: when to use it

Use when: Neutral to bullish; you want to buy the stock but at a lower price, and you are paid while you wait.

Avoid when: You would not want to own the stock after a sharp drop, or you need the cash elsewhere.

The Greeks, in plain words

Delta	Positive: you benefit as the stock rises (up to the premium).
Theta	Positive: each day the put you sold loses time value.
Vega	Negative: rising implied volatility makes the short put more expensive.
Gamma	Negative: sharp moves down hurt quickly.

Choosing strikes and expiration

Pick a strike at a price you genuinely would pay — often near support or 0.20–0.30 delta — with 30–45 days to expiration.

Managing the trade

Buy back at 50–75% of max profit, or roll down and out for a credit if the stock drops. If assigned, many traders then sell covered calls (the “wheel”). Early assignment can happen when the put is deep in the money.

Common mistakes

Selling puts on stocks you don’t want just for the premium.
Using margin so you can’t actually afford assignment.
Ignoring earnings dates.

FAQ

Is it safer than buying stock?
The risk profile is similar to owning stock from strike − premium, but your upside is capped at the premium.

Do I need $9,500?
For a cash-secured put, yes — strike × 100.

Explained simply

When would someone use this?

When you would be happy to own a stock at a lower price and want to be paid while you wait.

The setup, in plain words

Sell one put below the current price and set aside strike × 100 in cash. If the stock stays above the strike, you keep the premium. If it falls below, you buy the shares at the strike.

Max profit, max loss and breakeven

Max profit: The premium received.
Max loss: (Strike − premium) × 100, if the stock falls to $0.
Breakeven: Strike − premium received.

A simple numeric example (hypothetical)

Stock at $100. You sell a $95 put for $2.00 ($200) and set aside $9,500. Stock ends at $98: put expires, you keep $200. Stock ends at $90: you buy 100 shares at $95; with the premium your effective cost is $93, so you are down $300 on paper.

The main risks, in plain words