Cash-secured put

Also called: Cash-covered put

Selling a put obligates you to buy the stock at the strike if the buyer exercises. "Cash-secured" means you hold the full purchase amount in reserve, so the obligation is fully funded rather than leveraged.

How does a cash-secured put work?

You sell a put below the current price and collect premium. If the stock stays above the strike, the put expires and you keep the premium. If it falls below, you are assigned and buy the shares at the strike — but your effective cost is the strike minus the premium you already collected. It is a way to get paid while waiting to buy at a target price.

This definition is for educational and informational purposes only and is not investment, tax, or legal advice. Option strategies involve risk and are not suitable for all investors. Tax treatment of options is complex and depends on individual circumstances, holding periods, and applicable law. Consult a qualified tax professional and investment advisor before acting. Yayati Asset Management is a Registered Investment Adviser.