Cash-Secured Put
Selling a put option while holding enough cash in the account to buy 100 shares at the strike if assigned. The seller collects premium up front and accepts the obligation to buy the underlying at the strike if the option is exercised. The trade works as an income strategy only when the seller would genuinely be content to buy the shares at the strike -- the same "consent test" that governs covered calls. Cash-secured puts are structurally a disciplined entry on a stock at a pre-approved price with the premium offsetting some of the drawdown if assignment lands; they are NOT a yield product disconnected from the equity exposure they generate.
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Related terms
American Option · Asian Option · Barrier Option · Basket Option · Butterfly Spread · Calendar Spread
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