Cash-secured put
TradingDefinition
Selling a put option while holding enough cash to buy the shares if assigned. Generates income; if the put is exercised, you take ownership at a price below the original strike (effective discount = strike − premium).
Strategy of choice for "I'd like to own this stock but only at a lower price." Common for blue-chip dividend names. Risk: if the stock craters, you're still obligated to buy at the original strike — no hedge.
Strategy of choice for "I'd like to own this stock but only at a lower price." Common for blue-chip dividend names. Risk: if the stock craters, you're still obligated to buy at the original strike — no hedge.
Example
XYZ at $100. You like the company but want to buy below $95. Sell a 30-day $95-strike put for $2. If XYZ is above $95 at expiration, you keep $200 cash. If below, you buy 100 shares at $95 — net cost $93 ($95 strike − $2 premium).