A cash-secured put is the same trade as selling a put — with one critical discipline: the full cash needed to buy the shares is set aside in your account.
What Makes It "Cash-Secured"?
When you sell a put, your broker requires collateral. A cash-secured put means you hold the entire strike × 100 in cash, so if you are assigned, the purchase is already funded. You never borrow on margin.
How It Works
- Choose a stock you want to own.
- Sell a put at a strike below the current price.
- Set aside the full cash to cover assignment.
- Collect premium — keep it whether assigned or not.
Capital Efficiency
Because the cash is reserved, your return is measured against the full collateral amount. The premium you collect is your income; the cash you hold is your protection. This is the most conservative, transparent way to generate options income.
Key Takeaways
- Cash-secured puts eliminate margin risk.
- Your return is measured against full collateral.
- Assignment becomes a planned purchase, not a surprise.