Cash Secured Puts
Get paid to wait for a stock to reach your buy price. This is the first building block of income-generating options strategies.
How cash secured puts work
A cash secured put means you sell someone the right to sell you 100 shares at a specific price. You collect premium upfront and set aside the cash to buy those shares if needed. You are getting paid to wait for a stock to come to you.
Possible outcomes
There are three ways a cash secured put can end. The stock stays above your strike and you keep the premium. The stock drops to your strike and you buy shares at an effective discount. Or the stock drops well below your strike and you own shares at a paper loss.
When to use this strategy
Sell cash secured puts when you want to own a stock at a lower price than it currently trades. You should have the cash ready, expect the stock to stay stable or rise, and avoid selling puts into earnings or other major events.
Cash requirements
You need enough cash to cover the full purchase. A $50 put requires $5,000 per contract. This cash is held as collateral while the trade is open. Using margin instead turns a straightforward strategy into something much more dangerous.
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