Cash-Secured Put
A cash-secured put is an options strategy in which an investor sells a put option and simultaneously sets aside enough cash to buy the underlying asset if it falls to the option's strike price. The strategy is used when an investor wants to acquire a stock for less than the current market price or to generate income through the premiums received from selling the put options
The option seller (writer) sells a put option on a stock they would like to own, but perhaps at a lower price than it currently trades at. The put option gives the buyer the right (but not the obligation) to sell the stock at the strike price (predetermined price) up until the expiration date.
The main advantage of a cash-secured put is the ability to generate income upfront through the premium received from selling the option. If the option expires worthless or the buyer does not exercise their right, the investor keeps the premium as profit. Additionally, if the stock price remains above the strike price, the investor can keep the premium without having to buy the stock.
Last modified 2mo ago