Cashsecured

Cashsecured, often written as cash-secured or cash-secured put, is a term used in options trading to describe a strategy in which the seller of a put option funds the position with cash rather than a margin loan. The approach ensures that the capital required to buy the underlying stock if assigned is readily available, reducing the reliance on margin.

In practice, the trader sells put options and sets aside enough cash to buy the underlying shares at the option’s strike price for the contract size (typically 100 shares per standard option). If the option expires worthless, the trader keeps the premium and the cash remains untouched for other uses. If the stock falls below the strike price, the trader may be assigned and must purchase the shares at the strike price, using the cash set aside. The maximum potential loss is the strike price minus the premium received, multiplied by the contract size, while the maximum gain is the premium collected if the option expires worthless.

This approach is used to generate income through premiums while potentially acquiring stock at a discount to the current market price. Benefits include reduced risk relative to naked put selling and clearer capital requirements, since no margin loan is used. Risks include the opportunity cost of capital, potential losses if the stock declines significantly below the strike, and liquidity considerations tied to tying up cash.

Related concepts include naked puts, covered calls, and other premium-generating strategies. Tax treatment and suitability depend on jurisdiction and individual circumstances.