Cash-Secured Put
Selling a Put fully backed by cash to buy the underlying if assigned — getting paid premium to set a buy price below the current level.
A Cash-Secured Put is the sale of a Put option fully backed by enough cash to buy the underlying if assigned. You collect premium today; in exchange you agree to buy the underlying at the strike price if it falls below the strike by expiration.
Two outcomes:
- ●The underlying stays above the strike — the Put expires worthless and you keep the full premium.
- ●The underlying finishes below the strike — you are assigned and buy at the strike, but your effective cost basis is the strike minus the premium you collected, below the price when you sold.
Why it belongs in the high-probability playbook:
- ●It harvests the same Volatility Risk Premium as other short-premium trades.
- ●It is the cleanest way for stock-minded traders to get paid to set a buy price.
- ●Risk is fully funded — no margin surprises — though the downside below the strike is real if the underlying falls sharply.
Strike selection follows the same sigma logic: a lower-delta (further out-of-the-money) Put has a higher probability of profit but collects less premium.
Important: Options trading involves substantial risk of loss and is not suitable for all investors. This definition is educational and uses SPX for illustration — it is not financial advice.
Related Terms
A contract that gives the buyer the right to sell SPX at a set price (the strike) before expiration — profits when the index falls below the strike minus the premium paid.
A two-leg, defined-risk structure: sell a nearer option and buy a further one for protection, collecting a net credit — the workhorse of high-probability premium selling.
A premium-selling structure with no protective wings — sell an out-of-the-money Call and Put — more theta-efficient than an Iron Condor but undefined risk.
The persistent gap between implied volatility and realized volatility — the structural reason option sellers are, on average, systematically overpaid.
The estimated chance a trade is profitable at expiration — the most useful single number for comparing premium-selling trades before entry.
An option Greek measuring price sensitivity to a 1-point move in the underlying — and a fast approximation of the probability of finishing in the money.