cash-secured put

Cash-Secured Put

A put option in which the writer deposits an amount equal to the strike price of the put into an account in case the option is exercised. For example, if one writes a put for 100 shares with a strike price of $10, the writer agrees to place $1,000 into an account and does not use that money for anything. In a put option, the writer agrees to buy the underlying asset from the holder at the agreed-upon strike price should the holder exercise the option. Securing the put with cash reduces the risk to the holder that the writer will be unable to meet the obligations of the contract.

cash-secured put

A put for which the writer deposits an amount of cash equal to the option's exercise price. For example, the writer of a put option on 100 shares of Sears stock at $35 per share would deposit $3,500 because the writer has agreed to buy $3,500 of Sears common stock if the put is exercised. The funds for a cash-secured put may be placed in short-term income-earning securities such as Treasury bills.
References in periodicals archive ?
The strategy simultaneously writes (sells) an option against each position in order to seek cumulative price appreciation from the portfolio's global exposure, while generating a consistent income stream from the sale of covered call and/or cash-secured put options, creating less dependence on markets for returns during downturns.
On days like today, put premiums have been 'jacked' up high, writing naked or cash-secured puts is a winning strategy, buying 1x index ETFs in small increments is a strategy (in my case those are non-commissioned that have no trading restrictions).
The last two webinars, on cash-secured puts and vertical call spreads, attracted hundreds of attendees each, quickly making the series among the most-popular webinars in the options space.