Cash-Secured Put
Get paid to potentially buy stock at a discount. Outlook: neutral. Direction: credit. Risk: limited.
A cash-secured put (CSP) means selling a put while holding enough cash to buy 100 shares at the strike if assigned. You collect the premium either way. If the underlying stays above the strike, you keep the premium as pure income; if it falls below, you are put shares at the strike minus the premium — an effective buy-at-discount.
CSPs are one of the two core premium-selling strategies (alongside covered calls). Both are framed around being willing to hold the underlying — either to keep selling covered calls after assignment, or to accumulate a position at target prices.
Break-Even
Break-even = strike − premium per share. Below this level at expiration, the position is underwater.
Max Profit
Premium received × 100 × contracts, achieved if the put expires worthless (spot above strike).
Max Loss
(Strike − premium) × 100 × contracts, if the underlying goes to zero. Same downside as owning shares from the strike level.
When to Use
- You want to buy the underlying at a level below the current spot.
- IV rank is elevated so the put premium is rich.
- You have cash on hand — the secured portion earns T-bill yield while you wait.
- You are willing to accept assignment and hold shares, not just collect premium.
Common Pitfalls
- Downside is steep if the underlying collapses — you bought shares at the strike regardless.
- Assignment happens at strike, not at the lower spot, so a sharp drop means immediate mark-to-market loss.
- Early assignment is uncommon but possible on deep-ITM puts near dividend dates (for the dividend).
- Selling too far OTM means tiny premium relative to capital tied up.
Try This on a Live Ticker
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