What Are Cash Secured Puts? Are They Worth Doing?
Cash Secured Puts Could be Another Way to Add Additional Weekly Paychecks with Weekly Options
Cash secured puts are a conservative options strategy that can be a great way for investors to generate income and potentially buy stocks at a discount. Here are the key things to know about cash secured puts:
With this strategy, you sell (write) put options and receive premium payments upfront in exchange for taking on the obligation to buy the underlying stock if it falls below the strike price by expiration.
The “cash secured” part means you need to have enough cash in your brokerage account to cover potentially buying 100 shares of stock for each contract sold, just in case the put option is exercised.
By selling put options, you’re betting that the stock won’t drop below the strike price prior to expiration. If it doesn’t, you simply keep the premium as profit.
If the stock does close below the strike at expiration, you are “put” the shares but at the strike price, which becomes the effective purchase price including the premium received.
This allows accumulating positions in stocks you like at a discount price at or below the market. Rolling the puts can extend this strategy.
Premium income makes it a lower-risk way to generate steady returns while waiting for a buying opportunity. Implied volatility is key – sell puts when IV is high to boost premiums.
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