Options strategies
Cash-secured put
Definition
A short put backed by cash equal to the strike times 100 per contract, set aside to buy the shares if the put is assigned.
Example
Say a stock trades at $42 and you sell one $40 put for $1.10, collecting $110, while setting aside $4,000 in cash, the strike times 100. If you are assigned, you buy 100 shares at $40, an effective cost of $38.90 per share after the premium. If the stock stays above $40, the put expires worthless, you keep the $110 and the $4,000 is freed up.
Hypothetical numbers, for illustration only.
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