Cash-secured put strategy (CSP)

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A cash-secured put means you sell a put option and set aside enough cash to buy 100 shares at the strike if you are assigned. You collect a premium up front. If the stock stays above the strike, the put may expire worthless and you keep the premium. If the stock falls below the strike, you may buy the shares at the strike (assignment).

Many beginners use CSPs when they are willing to own the stock at a lower effective price and want to be paid while they wait.

Structure

Short 1 put
Cash reserved ≈ strike × 100 (broker requirements can vary)

Payoff intuition

Max profit = premium received (if put expires worthless)
Risk = stock can fall well below the strike — you still buy at the strike (loss vs market price can be large)
Break-even ≈ strike − premium per share
Assignment means you buy 100 shares, not a mystery outcome

Green = profit · Red = loss · Flat right side = put expires, you keep the credit

Example: Stock at $100. Sell the $95 put for $2.00 ($200 credit). Cash secured ≈ $9,500.
Above $95 at expiry: keep ~$200; no shares.
Assigned at $95: effective cost ≈ $95 − $2 = $93 before fees. You now own the shares and take stock risk from there.

When it fits / when it does not

Fits: you genuinely want to own the shares at a lower price; you can reserve the cash; you accept stock risk if assigned
Does not fit: you cannot buy the shares; you need the cash for other goals; you are only chasing premium on a name you would hate to own

Link to the Wheel

Many traders connect CSPs to the Wheel strategy: sell puts until assigned, then sell covered calls until shares are called away, then start again.

Open Cash-Secured Put in Builder → Advanced lesson (CSP, Wheel, more) How to read the options chain

Beginner FAQ

What is a cash-secured put?
You sell a put and reserve enough cash to buy 100 shares at the strike if assigned. You keep the premium if the put expires worthless.

What happens if a cash-secured put is assigned?
You buy 100 shares at the put strike. Effective cost is about strike minus premium collected.

Is a cash-secured put the same as the Wheel?
A CSP is the first leg of the Wheel. The Wheel continues by selling covered calls after you are assigned shares.

Next: Print the options cheat sheet or open this setup in the Builder.

Educational only: Not financial advice. Selling puts can lead to owning shares at a loss versus the market. Not a broker; not affiliated with any institution.