Cash-Secured Put
Selling a put while maintaining enough cash to buy the shares if assigned.
What is a Cash-Secured Put?
Selling a put while maintaining enough cash to buy the shares if assigned.
Construction
Sell one put and reserve enough cash for potential assignment of the contract-equivalent shares.
When it may be studied
To study entering a stock position below the current market price while accepting downside risk similar to stock ownership below the break-even.
Expiration profile
Maximum risk: Strike price minus premium if underlying falls to zero
Maximum reward: Premium received
Break-even: Strike price minus premium received
Worked example
Sell a 45 put for $1.50 while reserving $4,500. Maximum simplified profit is $150; break-even is $43.50; assignment can require buying 100 shares at $45.
Key risks and limitations
A falling stock can create a large loss. Premium received does not eliminate downside, and assignment can occur before expiration.
Entry and exit checklist
- Confirm contract multiplier, expiration, exercise style, settlement, and liquidity.
- Calculate the maximum loss under the intended structure.
- Review earnings, dividends, corporate actions, and other event risks.
- Define an exit, adjustment, or expiration plan before entry.
- Understand what happens if one leg is assigned or exercised early.