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What is a cash-secured put, in simple terms?

A cash-secured put pays you to wait for a price you'd buy a stock at. You set the cash aside, collect a fee now, and promise to buy 100 shares at that price if asked.

Options guide · 5-minute read · Updated 2026-10-26

The short answer

You'd like to buy a stock, but at a lower price than today. So you sell a Put option at that lower price. The buyer pays you a fee, the premium, now. In return, you promise to buy 100 shares at that price, the Strike price, if they choose to sell.

"Cash-secured" means you keep the cash to pay for those shares. Your broker holds it aside until the put is gone.

Think of it like a paid offer to buy

Picture placing an offer on a house below the asking price. Now picture the seller paying you to keep that offer open for a month.

• If the price never falls to your offer, nothing happens. You keep the payment.
• If it falls to your offer, you buy the house at your price. You keep the payment too.
• If it falls far below your offer, you still have to buy at your price. That's the catch.

One example (an illustration, not a trade idea)

A made-up stock, XYZ, trades at $50. You'd be glad to own it at $45.

You sell one 30-day $45 put for $1.00 a share. You collect $100 today. Your broker sets aside $4,500 ($45 × 100).

What you get, and what you risk

You get: a fee now, and if you're assigned, a purchase price lowered by that fee. Buying at $45 after collecting $1 means your real cost is $44 a share.

You risk: buying a stock that keeps falling. The fee doesn't change the promise. At $30, you still pay $45.

You miss: any big rise. If XYZ jumps to $60, you keep $100 and own nothing.

When people use it

• They'd be happy to own a stock, at a lower price than today.
• They have the full cash for 100 shares at the strike, and that amount fits their account.
• They'd rather be paid to wait than place a plain buy order.

The test is simple: would you buy 100 shares at the strike right now, with no fee at all? If not, don't sell the put.

How it fits the wheel

A cash-secured put is the first step of the wheel strategy. If you're assigned, you own 100 shares. Then you sell covered calls on them. If the shares get sold, you start again with a put.

For the second half, read a covered call in simple terms.

Account note: in Canada, covered calls are widely allowed in a TFSA or RRSP, but cash-secured puts depend on the broker. Options permissions differ by broker everywhere, so check yours.

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