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Glossary · The Cash-Secured Put · C

All terms

Cash-secured put in plain English.

Selling a put option while holding enough cash to buy the 100 shares at the strike price if you are assigned. You collect the premium up front in exchange for agreeing to buy the stock at a price you chose.

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Track

The Cash-Secured Put

19 terms in this track

Taught in

What a cash-secured put really is

In the index

19 of 100

Filed under C

Connections

8

Related terms mapped below

01

The idea, in context

How to read the picture above and where the Academy teaches it.

Reading the illustration

A short put at expiry: above the strike you keep the premium (gold); below the breakeven the loss grows (rose).

This definition usesPremiumStrike price

In French: Put garanti par liquidités

Where it’s taught

The Cash-Secured Put

What a cash-secured put really is

“What a cash-secured put really is” introduces this term with worked examples, a quiz and the trades around it. The Academy is part of the YieldCove membership.

About the AcademyOpen the lesson (members)

02

How it works in the wheel

Where this idea fits in the cash-secured put → covered call cycle.

The cash-secured put is the first leg of the wheel. You pick a stock you would be happy to own, choose a strike at or below the price you would pay for it, and sell one put for every 100 shares you could afford to buy.

Your broker sets aside the full obligation — strike × 100 — as collateral. That cash is what makes the put secured: you can never be forced to buy more stock than you already paid for.

At expiration there are two outcomes. If the stock is above the strike, the put expires worthless, you keep the premium and you can sell another put. If it is below, you are assigned: you buy the shares at the strike and the wheel moves to its second leg, the covered call.

Run your own numbers

Try your own stock, strike and premium in the free cash-secured put calculator — no account needed.

Try it in the cash-secured put calculator

Related terms

PremiumStrike priceAssignmentCollateralBreakevenDeltaCovered callWheel strategyExpiration

03

Worked example

Illustrative numbers, before commissions and taxes. Not a recommendation.

Selling a $50 put on a $52 stock

  1. XYZ trades at $52. You sell 1 put with a $50 strike expiring in 30 days for $1.20 per share — $120 in premium, credited immediately.
  2. Your broker holds $5,000 of collateral (50 × 100). The premium is a 2.4% return on that cash for 30 days — about 29% annualized if you could repeat it every month, which is never guaranteed.
  3. Your breakeven is 50 − 1.20 = $48.80. Above $50 at expiration: the put expires, you keep all $120.
  4. Below $50 — say XYZ closes at $46: you are assigned 100 shares at $50. Your effective cost is $48.80, so the position shows an unrealized loss of (46 − 48.80) × 100 = −$280, and you now start selling covered calls.

The takeaway

The premium lowers what you pay for the stock, but it does not protect you from a large drop: below the breakeven you lose almost dollar for dollar, just like an owner of the shares.

04

Risks and FAQ

What can go wrong, and the questions traders ask most.

Risks to respect

  • Downside is large. The most you can make is the premium; the most you can lose is the strike minus the premium, times 100, if the stock goes to zero.
  • Assignment can come early. US equity options are American-style, so a deep in-the-money put can be assigned before expiration — usually harmless, because you had the cash ready.
  • Capital is tied up. The collateral cannot be used elsewhere until the put expires, is closed or is assigned, which is why concentration and position size matter.
  • Rich premium means risk. A high premium usually reflects high implied volatility — earnings, news or a falling stock. Sell puts only on companies you would genuinely hold.

Frequently asked questions

How much money do I need to sell a cash-secured put?

The strike price times 100 for each contract: a $50 strike needs $5,000 of cash. The premium you receive is extra, and most brokers let you count it toward buying power.

Is a cash-secured put safer than buying the stock?

Slightly: you buy at a lower effective price (strike minus premium) and you earn the premium when the stock stays flat. But the downside if the company collapses is almost the same as owning the shares.

What delta should a cash-secured put have?

Many wheel traders sell puts around 0.20–0.30 delta, roughly a 20–30% chance of finishing in the money. Lower delta means less premium and fewer assignments; higher delta means more premium and more stock.

Can I close a cash-secured put before expiration?

Yes. Buying the same put back (buy to close) ends the obligation at any time. Many traders close once they have captured 50–75% of the premium to free the capital early.

05

8 terms around this one — the words its definition uses, its lesson siblings and the terms that build on it.

  • Used in this definition
  • Same lesson
  • Builds on this term
  • Same track

06

Where to go next

Understand it, try it with real numbers, then track it for free.

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