The cash-secured put

Sell a put below the price and hold the cash to buy the shares if you are asked.
An offer to buy a stock cheaper, with the premium paid to you for making it.

What it is

One leg. A put sold below the current price.
Cash set aside to buy the shares at that strike if it is exercised.
The premium is paid to you on the day you open.
No second leg. Nothing caps the loss except the fact that a stock cannot go below zero.

What you are actually agreeing to

You are agreeing to buy the shares at the strike, if asked.
You keep the premium whether that happens or not.
Your effective purchase price is the strike less the premium, which is the honest version of “getting paid to wait”.
If the stock never falls that far, you keep the premium and buy nothing.

The trade, written out

Everything above is the idea. This is the position — the lines you would actually send to a broker.

Order ticket

Leg	Action	Qty	Expiry	DTE	Strike	Delta	Price
1	Sell to open	-1	16 Oct 26	45	95 Put	+0.25 (25Δ)	$1.35
Net	Credit	1 position	16 Oct 26	45	—	+0.25	$1.35

SELL -1 XYZ 16 OCT 26 95 PUT @ 1.35 CREDIT

Reading it back

One expiry, one strike. Nothing else in the position.
Sell the 95 put — below the money, so it starts out of the money.
The credit is paid to you on the day.
The cash behind it is the real position size, and it is far larger than the credit.

The argument

Bull

makes the claim

I wanted to buy this stock anyway, and now I am paid to wait for a better price. If it falls I own it lower than the market would have sold it to me. If it doesn’t, I keep the money and write another one.

Bear

doubts it

You are paid to buy something in the exact circumstance where nobody wants it. The stock falls twenty per cent and you are handed it at five per cent off. That is not a discount, it is a queue you volunteered for.

Ferret

settles it

The disagreement is entirely about what happens after assignment, and neither of you has said. Name the delta, the tenor, and what you do with the shares once you have them, and I can measure whether the premium ever covered the difference.

The shape of it

The cash-secured put on XYZ at $100 · 25% volatility · 4% rate · 45 days. Priced from the model, not written by hand.

	At expiry
Credit taken in	$135
Maximum profit	$135
Maximum loss	$-9,364
Breakeven	$93.65

Flat above the strike, falling below it. The shape of an obligation.
Maximum profit is the credit, and no more, however far the stock rises.
The maximum loss is very large — the table computes it against a stock at zero, because that is the only floor there is.
The breakeven is the strike less the credit, which is also your effective purchase price.

Where you actually enter

The chart above is the shape at expiry. It puts the bend right next to the money, which makes the trade look like it is already on the edge. It is not — here is the day you open it.

The same structure set up at 25Δ · 45 days · credit $135. The shaded band is the room between the stock and the strike you sold.

The same price, two different days

	On day one	At expiry
Stock at $95 (the strike you sold)	$-174	$135
Stock unchanged at $100	$0	$135

You enter at the dot, with the stock above the strike you sold.
The shaded band is your room before the obligation starts to matter.
At the strike, day one and expiry disagree sharply — the same effect as on a spread, without the long leg to soften it.
Without a long leg the day-one line keeps falling. There is no point where it flattens out.

Different ways to set it up

Two dials, as always: how far below the money, and how long. There is no width here — the risk is set entirely by the strike and the cash behind it.

Same delta, four tenors

Days	Short strike	Away from spot	Credit	Max loss	Risk : reward
7	98	+2.0%	$57	$-9,742	—
21	96	+4.0%	$81	$-9,518	—
45	95	+5.0%	$135	$-9,364	—
90	94	+6.0%	$209	$-9,190	—

The same delta sits far closer to the money at a week than at three months.
Short tenors mean more decisions and more premium per day.
Long tenors mean the cash is committed for longer, and that commitment is the real cost of this trade.

Same tenor, three deltas

Delta	Short strike	Away from spot	Credit	Max loss	Risk : reward
40Δ	99	+1.0%	$278	$-9,621	—
25Δ	95	+5.0%	$135	$-9,364	—
15Δ	92	+8.0%	$69	$-9,130	—

A 40 delta put is close to a bet on direction.
A 15 delta put is closer to a bet that nothing dramatic happens.
The premium falls away much faster than the distance grows, which is the same finding as on every credit structure here.

The cash is the position. The option is just the terms.

What the Greeks are doing

Four questions about the same position, and a fifth that barely applies here.
Every structure answers them differently, which is why this site never writes a general page about the Greeks.

Days left	Delta	Gamma	Theta / day	Vega	Rho
45	+24.7	-3.60	$+2.79	$-11.08	$+3.21
21	+17.8	-4.34	$+3.52	$-6.25	$+1.06
7	+6.4	-3.62	$+3.03	$-1.74	$+0.12

The position at entry — stock $100 · 25% volatility. Per contract, from the model.

Delta — which way you need the stock to go

Positive — selling a put is a bullish position.
It grows as the stock falls towards the strike, which is the wrong direction for it to grow in.

Theta — what time does to you

Positive. Every quiet day pays.
The table shows what one day is worth at each point in the trade’s life.

Vega — what a change in fear does to you

Short volatility, and unhedged.
This is the cleanest short-volatility position on the site, because there is no long leg buying any of it back.

Gamma — how fast your delta turns against you

Negative and unbounded by any long leg.
Near the strike and near expiry it is the largest gamma exposure of any structure here.

Rho — what a change in interest rates does to you

Small, and it is the cash behind the trade that earns the interest anyway.
One row.

Theta and gamma are one thing

This is the part that decides whether the strategy works, and it is almost never put plainly.

You cannot be paid theta without being short gamma. They are not two features of the trade. They are the rent and the risk on one lease.

The same position, three points in its life

Nothing about the position changes.
The stock sits still at $100 throughout.
Only the days left move.

Days left	Delta	Gamma	Theta / day	Vega	Rho
45	+24.7	-3.60	$+2.79	$-11.08	$+3.21
21	+17.8	-4.34	$+3.52	$-6.25	$+1.06
7	+6.4	-3.62	$+3.03	$-1.74	$+0.12

Now move the stock to $95.50

Same three dates, same put.
Now with the stock down at the strike you sold — the point where you are about to own something.

Days left	Delta	Gamma	Theta / day	Vega	Rho
45	+43.6	-4.70	$+3.18	$-13.21	$+5.49
21	+43.8	-6.88	$+4.89	$-9.03	$+2.52
7	+42.4	-11.85	$+8.80	$-5.18	$+0.80

Gamma goes from -4.70 to -11.85.
Theta goes from $+3.18 a day to $+8.80.
Both climb, and neither is available without the other.
Delta now moves roughly 3 times as far for every dollar the stock travels.

Which is what DTE actually sets

Shorter tenor: more income per day, and a delta that turns faster.
Longer tenor: less of both, and a longer commitment of the cash.
With no long leg there is nothing to blunt the second half of that trade-off.

The trap

The trap is the word “secured”.

Secured means you have the cash. It does not mean the position is safe.

Cash-secured tells you that you can honour the obligation.
It says nothing about whether you should want to.
The maximum loss is the strike less the credit, times a hundred — the number in the table above, and it is the size of a stock position, not an options one.
Sold on margin instead of against cash, the same trade is the fastest way to a margin call on this site.

Why it matters

The premium is small and the obligation is large, which is exactly the ratio that makes a strategy look safe until it isn’t.
Judge it by the cash committed, never by the credit received.
That is also how it should be sized, and how any test of it has to be scored.

How this shows up in our tests — pending. No result has been published on this structure yet.