Cash-Secured Puts: The Options Strategy for Buying Stocks at a Discount
A cash-secured put involves selling a put option while holding enough cash to buy the shares if assigned — collecting premium income and potentially acquiring stock below market price.
A cash-secured put is an options strategy where an investor sells a put option on a stock while holding sufficient cash to purchase the underlying shares at the strike price if assigned. ## How It Works You sell a put with a $45 strike on a stock trading at $50, collecting a $2 premium. Two outcomes: - **Stock stays above $45**: Put expires worthless, you keep $2 premium (4.4% return on cash reserved) - **Stock drops below $45**: You're assigned — required to buy 100 shares at $45. Net cost is $43/share ($45 strike − $2 premium) ## The Wheel Strategy Cash-secured puts form the first leg of the "wheel strategy": 1. Sell cash-secured puts → collect premium 2. If assigned, sell Covered Calls: The Options Strategy That Generates Income from Stocks You Own on the acquired shares → collect more premium 3. If shares get called away, return to step 1 The strategy generates consistent income in sideways or moderately bullish markets. Maximum profit is the premium collected; maximum loss is the full strike price minus premium (if the stock goes to zero). **See also:** Stock Options Explained: Puts, Calls, and How They Work · AI-Assisted Stock Trading Bots: Alpaca API, Congressional Copy Trading, and the Wheel Strategy