Writing cash-secured puts(redirected from Writing Cash Secured Puts)
Writing cash-secured puts
Writing Cash-Secured Puts
The act of writing a put option with the intention to avoid a margin account. Because a put writer is obligated to buy the underlying should the option buyer exercise the option, the writer must have easily available cash in order to cover the exercise. Rather than borrowing this money from a broker, the writer deposits with the broker a cash amount equal to the exercise price of the option. This way, the option is immune to margin calls.