Cash-Secured Puts: Get Paid to Buy Stocks at a Discount

What Is a Cash-Secured Put?

A cash-secured put is the mirror image of a covered call. Instead of selling a call on shares you own, you sell a put option while holding enough cash to buy 100 shares if assigned.

You're essentially saying: "I'd love to buy this stock at a lower price, and I'll accept premium for waiting."

If the stock stays above your put strike, the option expires worthless and you keep the premium — pure income. If the stock drops below your strike, you buy 100 shares at the strike price, but your effective cost is even lower because you keep the premium.

Cash-secured puts are the entry point of the wheel strategy, which cycles between selling puts and selling covered calls.

How to Sell Cash-Secured Puts

Step-by-step:

1. Identify a stock you want to own at a lower price 2. Ensure you have enough cash to buy 100 shares at the strike 3. Sell a put option at your target purchase price 4. Collect the premium immediately

Example: Apple trades at $230. You'd love to buy at $215. • Sell $215 put, 30 DTE, for $2.50 ($250 premium) • Cash reserved: $21,500 (100 shares × $215)

If Apple stays above $215: You keep $250. Sell another put. If Apple drops to $210: You buy 100 shares at $215. Effective cost: $212.50 ($215 - $2.50 premium). Then start selling covered calls on your new shares.

Cash-Secured Puts vs Covered Calls

Both strategies collect premium, but at different points in the ownership cycle:

Cash-Secured Puts: • You don't own shares yet • You profit when the stock stays flat or rises • Assignment means buying shares (entering a position) • Best when you want to accumulate stock at a discount

Covered Calls: • You already own shares • You profit when the stock stays flat or rises modestly • Assignment means selling shares (exiting a position) • Best when you want income from existing holdings

Combined (the wheel): 1. Sell puts → get assigned → own shares 2. Sell covered calls → get assigned → back to cash 3. Repeat

At every step, you collect premium income.