GLOSSARY // Options
Cash-Secured Put
Selling a cash-secured put means writing a put while holding enough cash to buy 100 shares at the strike if assigned. The seller collects the premium up front and takes on the obligation to purchase the stock at the strike price should it fall there.
Traders use it to get paid while waiting for an entry: either the put expires worthless and the premium is pure profit, or the shares arrive at an effective cost of strike minus premium — below where the stock traded when the put was sold. The risk is the same as owning the stock from the strike down: a collapse to $20 still means buying at the strike.
A stock trades at $48. You sell one 30-day 45 put for $1.50, setting aside $4,500, and collect $150. If the stock stays above $45, the put expires and the $150 is a 3.3% return on the reserved cash in a month. If the stock drops to $43 and you are assigned, you own 100 shares at an effective $43.50 each — $4.50 below the price when you sold the put.
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Educational only — not financial advice. Definitions simplified for clarity; markets are messier than definitions.