Cash-Secured Put

A cash-secured put is an options trade where a trader sells a put option while holding enough cash in reserve to buy 100 shares at the strike price, for each contract sold, if assigned. The trader collects a premium immediately, which is theirs to keep regardless of outcome. If the stock stays above the strike through expiration, the put expires worthless and the trader keeps the premium with no further obligation. If the stock falls below the strike, the trader is assigned 100 shares at that price, with a real cost basis equal to the strike minus the premium already collected. "Cash-secured" specifically means the purchase is backed by real cash set aside as collateral, not margin or borrowed buying power. It's the first step of the wheel strategy, and the risk is real: the trader is still obligated to buy at the strike even if the stock has fallen well below it by expiration.