Cash-Secured Put

Get paid to wait to buy shares — premium income, full cash collateral · payoff at expiration

Worked example

Sell 1 × $100.00 put for $3.00 per share — you collect a $300.00 credit and set aside $10,000.00 as cash collateral (the most you can lose is -$9,700.00, if the stock falls to zero). The position breaks even at $97.00 (strike − premium); you keep the full credit as long as the stock stays at or above the strike.

At expiration: if the stock is at $110.00, the position shows a net P&L of $300.00; if the stock is at $90.00, the position shows a net P&L of -$700.00.

When to use

You would be happy to own 100 shares at the strike, and want to be paid the premium while you wait.
You expect the stock to stay flat-to-up; if it never dips to the strike you simply keep the credit.
You hold the full cash to buy the shares if assigned — this is a secured, defined-risk position, not naked.

Common pitfalls

If the stock falls well below the strike you are still obligated to buy at the strike — your loss mirrors owning the shares from the breakeven down.
Your maximum profit is just the premium collected, no matter how far the stock rises.
The full strike value is tied up as collateral, so the capital required is large relative to the premium earned.