Cash-Secured Put

Sell a put backed by cash to get paid for agreeing to buy a stock you want at a lower price.

A cash-secured put (CSP) means selling a put while setting aside the cash to buy 100 shares if assigned. You get paid to place a limit order below the market.

Market outlook

Neutral to bullish — you'd be happy to own the stock at the strike, and you collect premium while you wait.

Construction

• Sell 1 put at strike $K$ for premium $P$.
• Set aside $100 \times K$ in cash to cover potential assignment.

Risk / reward

• Max profit: $P$, kept if the stock stays at or above $K$.
• Effective purchase price if assigned: $K - P$
• Max loss: like owning the stock from $K - P$ down to $0 (substantial but defined by the strike).

When to use it

• You want to buy a quality name but at a discount to today's price.
• As the first leg of a "wheel" (CSP → if assigned, sell covered calls).

Risks & management

• Assignment risk: a sharp drop assigns you the shares well above market.
• Opportunity cost: in a strong rally you keep only the premium and miss the move.
• Sizing matters — only sell as many puts as you can truly afford to be assigned.