Snapshot
Legs
Sell 1 Put + Hold 100% Cash Collateral
Outlook
Neutral to Bullish
Max profit
Premium received
Max Loss
Strike price minus premium received
A cash-secured put option strategy involves selling a put option while keeping enough cash reserved in your account to purchase the shares if the option is assigned. Investors use this approach to generate income or to buy a stock they want at a lower price than current market rates.
If the stock price stays above the strike price, the option expires worthless and you keep the full cash fee. If the stock drops below the strike price, you are assigned the shares at the agreed price, with your effective cost reduced by the cash fee collected upfront.
Example
Stock
$100
Trade
- Sell $95 Put for $2.50
→ $2.50 credit ($250) + hold $9,500 cash
Breakeven
$92.50
Outcomes
- Stock ≥ $95: +$250 Max Profit
- Stock at $92.50: $0 Breakeven
- Stock < $92.50: Unrealized Loss if Assigned (e.g., -$1,250 at $80)