So, What Is A Cash Secured Put?

💸 Cash-Secured Puts: The Smartest Way to Get Paid to Buy Stocks

Updated: April 2025 | 4-Minute Read

Imagine getting paid to buy the stocks you already want—at a discount. That’s the beauty of a cash-secured put, and when paired with covered calls, you unlock a powerful income strategy called The Wheel.

Let's breaks it all down: how it works, when to use it, and what risks we should watch out for.

🤔 What’s a Cash-Secured Put?

A cash-secured put is when you:

1. Sell a put option on a stock you want to own

2. Set aside the cash to buy 100 shares if assigned

If the stock stays above the strike price, the option expires worthless and you keep the premium as pure profit. If the stock drops below the strike, you’re forced to buy it—but at a discount.

✅ Benefits of Cash-Secured Puts

1. Get Paid to Buy Low
Let’s say a stock trades at $100. You’d love to own it at $95. You sell a $95 put and collect $3.00/share. If it stays above $95, you keep the $300 premium. If it dips below, you buy the stock for $95—but your real cost is $92 with the premium.

2. High Probability of Profit
Most puts expire worthless. That means you pocket the premium more often than not.

3. Consistent Cash Flow
Selling puts monthly on solid stocks can be a reliable income stream—even in sideways markets.

4. Great Entry Into the Wheel Strategy
Sell a put → Get assigned → Sell a covered call. Rinse and repeat. It’s how long-term investors generate cash flow while holding their favorite stocks.

⚠️ Risks of Cash-Secured Puts

1. You Can Get Assigned in a Crash
If the stock tanks, you’re on the hook to buy it. Worst-case: the stock goes to $0. This is why we only sell puts on high-quality S&P500 stocks we want to own for the long term. No junk "meme stocks".

2. Opportunity Cost
If the stock soars, you miss the upside—you’re just sitting on cash, not riding the wave.

3. Capital Commitment
Your broker locks up the full amount needed to buy 100 shares. This is not a “get rich fast” move. It’s slow, steady, and capital-intensive.

🔁 How Cash-Secured Puts + Covered Calls = The Wheel

Here’s how The Wheel Strategy works:

1. Start with a cash-secured put
   Get paid to wait. If the stock dips, you buy it.

2. If assigned, sell a covered call
   Now you own the stock. Sell a covered call to collect more premium.

3. If the stock gets called away, repeat
   You sold the stock at a profit and got paid along the way. Now go back to Step 1.
   This strategy stacks premiums both ways—entering and exiting positions—without chasing momentum or timing the market.

📊 Final Word

A cash-secured put is not a gamble—it’s a calculated entry strategy for investors who want to build positions and generate cash at the same time. Combine it with covered calls, and you’ve got The Wheel: one of the most powerful, repeatable income strategies for long-term investors.

👉 Tired of waiting for dips? Start getting paid to buy great stocks instead.

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You don’t need to chase hype to build wealth—you just need a repeatable plan that pays you to stay patient.

— Steve

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