# Cash-Secured Put > A cash secured put sells a put while holding cash to buy the shares if assigned. Learn the payoff, the wheel strategy, strike choice and the risks involved. Source: https://learn.tradelabsai.com/options/cash-secured-put/ Track: Options · Level: Intermediate · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Cash-Secured Put", https://learn.tradelabsai.com/options/cash-secured-put/ A cash secured put is a short put backed by enough cash to buy the shares if you are assigned. You sell a put at a strike where you would be happy to own the stock, collect the premium and wait. If the stock stays above the strike, you keep the premium. If it falls below, you buy the shares at the strike, effectively at a discount equal to the premium. It is a conservative way to sell puts and a popular alternative to placing a limit order to buy. ## How it works 1. **Choose a stock you want to own** and a price you would pay. 2. **Sell a put** at that strike, usually 30 to 45 days out. 3. **Set aside cash** equal to strike × 100 per contract. 4. **At expiry:** above the strike, the put expires and you keep the premium. Below the strike, you are assigned and buy 100 shares per contract at the strike. ## Payoff at a glance | Feature | Cash secured put | |---|---| | Outlook | Neutral to bullish | | Maximum gain | Premium | | Maximum loss | Strike minus premium (if the stock goes to zero) | | Effective purchase price if assigned | Strike minus premium | | Cash required | Strike × 100 per contract | The payoff is identical to a [Short Put](https://learn.tradelabsai.com/options/short-put/). The difference is that the cash is fully in place, so no margin or leverage is involved. ## Worked example **Example: Waiting for a dip** A stock trades at $103. You would buy it at $95. Instead of a $95 limit order, you sell a 40 day $95 put for $1.80 ($180) and set aside $9,500. - **Stock at $99 at expiry:** put expires. You keep $180, a 1.9% return on the $9,500 set aside over 40 days. - **Stock at $90:** you buy 100 shares at $95. With the premium, your effective cost is $93.20. You are down $320 on paper, compared with $500 for someone who bought at $95 outright. - **Stock at $120:** you keep $180, but miss the rally. A buyer at $103 would have made $1,700. ## Cash secured put vs limit order | | Limit order at $95 | Cash secured $95 put | |---|---|---| | Stock stays above $95 | Nothing happens | Keep premium | | Stock dips below $95 then recovers before expiry | Bought at $95 | Usually not assigned; keep premium | | Stock ends below $95 | Bought at $95 | Bought at effective $93.20 | | Can cancel any time | Yes | Must buy back the put | See [Limit Orders](https://learn.tradelabsai.com/orders/limit-orders/). ## The wheel strategy The wheel combines cash secured puts and covered calls in a cycle: 1. Sell cash secured puts until assigned. 2. Once you own the shares, sell covered calls until they are called away. See [Covered Call](https://learn.tradelabsai.com/options/covered-call/). 3. Return to step 1. The wheel collects premium at each stage. Its weakness is a stock that falls sharply after assignment: you are left holding shares well below your cost, selling small calls while waiting for recovery. ## Choosing a strike - **Pick a price you genuinely want to pay,** based on valuation or support levels. See [Support and Resistance](https://learn.tradelabsai.com/price-action/support-and-resistance/). - **Lower strikes** give more safety and less premium. - **Higher strikes** give more premium and more chance of assignment. - **Delta** of about 0.20 to 0.30 is a common range for sellers. See [Delta](https://learn.tradelabsai.com/options/delta/). ## Risks - **The stock can fall far below the strike.** You still buy at the strike. - **Opportunity cost** if the stock rallies. - **Cash is tied up** while the put is open, though it may earn interest at many brokers. - **Event risk:** earnings and news can cause gaps below the strike. See [Price Gaps and How to Trade Them](https://learn.tradelabsai.com/chart-patterns/price-gaps-and-how-to-trade-them/). ## Common mistakes - **Selling puts on stocks only because premiums are high.** - **Selling more contracts than your cash can cover.** - **Ignoring earnings dates.** - **Treating it as income without accepting stock risk.** ## Frequently asked questions ### What is a cash secured put? Selling a put option while holding enough cash to buy the shares at the strike price if assigned. ### Is a cash secured put safer than a naked put? It uses no leverage, so it avoids margin calls, but the market risk per contract is the same. Its safety comes from limiting size to the cash you hold. ### What is the wheel strategy? A cycle of selling cash secured puts until assigned, then selling covered calls on the shares until they are called away, then repeating. Next, learn to insure a stock position with the [Protective Put](https://learn.tradelabsai.com/options/protective-put/). ## Continue learning - Next lesson: [Protective Put](https://learn.tradelabsai.com/options/protective-put/) - Previous lesson: [Covered Call](https://learn.tradelabsai.com/options/covered-call/) - Related: [Covered Call](https://learn.tradelabsai.com/options/covered-call/): A covered call sells a call against shares you own to collect premium. Learn the payoff, how to pick strikes, the trade offs and when the strategy works best. - Related: [Short Put](https://learn.tradelabsai.com/options/short-put/): A short put sells a put option to collect premium, profiting if the price stays above the strike. Learn the payoff, risks, margin and how it can buy stock. - Related: [Bull Put Spread](https://learn.tradelabsai.com/options/bull-put-spread/): A bull put spread sells a put and buys a lower strike put for a net credit. Learn the payoff, probability, strike and width choices, and how to manage losers. - Related: [Theta Harvesting](https://learn.tradelabsai.com/options/theta-harvesting/): Theta harvesting sells options to collect time decay and the volatility risk premium. Learn the evidence, the common structures and how to survive the tail risk. - Related: [Limit Orders](https://learn.tradelabsai.com/orders/limit-orders/): A limit order trades only at your price or better. Learn how buy and sell limits work, why they may not fill, queue priority and how to set a smart limit price.