Options & derivatives
Cash-secured put
Selling a put while holding enough cash to buy the shares if assigned.
How it works
You collect premium and agree to buy the shares at the strike if the price falls below it. If it does not, you keep the premium.
It is a way of being paid to place a limit order, provided you genuinely want the shares at that price.
Where it misleads people
The maximum loss is close to the full strike price, and assignment happens exactly when the shares have fallen. The premium is small compensation for buying into a decline.
Related terms
- Put optionThe right to sell an asset at a fixed price before a set date.
- AssignmentBeing required to fulfil an option you sold, because the buyer exercised it.
- PremiumThe price paid for an option, made up of intrinsic value plus time value.
- SkewnessWhether a return distribution leans towards large gains or large losses.
More in Options & derivatives
- Contango
- Call option
- Contract for difference
- Backwardation
- Covered call
- Delta
- American and European options
- Derivative
All 30 Options & derivatives terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.