How to Use Cash-Secured Puts to Buy Stocks Cheaper
Get paid while waiting to buy quality stocks at discounted prices—the cash-secured put strategy explained.
What is a Cash-Secured Put?
A cash-secured put is when you sell a put option at a strike price where you're happy to buy the stock. You reserve enough cash to purchase 100 shares if assigned, and collect premium now.
Core Concept:
If the stock stays above your strike → keep the premium. If below → buy stocks at your target price.
Example Trade
Example: AAPL Cash-Secured Put
Setup:
- • Sell 1 put, $45 strike, 30 DTE
- • Collect $1.10 premium ($110 total)
- • Reserve $4,500 cash as collateral
- • Target entry price: $45
Outcomes:
- • If not assigned: Keep $110 premium
- • If assigned: Effective cost = $43.90/share
- • Return on cash: 2.4% in 30 days
Frequently Asked Questions
Is this the same as the first leg of 'the Wheel'?
Yes, cash-secured puts are the foundation of the wheel strategy—sell puts until assigned, then sell covered calls.
What if the stock crashes?
You still must buy at the strike price. Manage risk through position sizing and only target stocks you'd hold long-term.
Can I use margin as collateral?
Some brokers allow T-bills or margin equivalents as collateral—check your broker's specific policies.