Short options
What is a Cash-Secured Put (CSP) and how is it used to acquire high-quality equities at a discount?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A cash-secured put involves selling a put option while setting aside enough cash to buy 100 shares at the strike price if assigned, allowing investors to earn premium income or potentially acquire stock at a price below the current market level.
How it works
If the stock stays above the strike, the put typically expires worthless and the seller keeps the premium; if it falls below the strike, the seller is obligated to buy shares at that strike regardless of further declines.
An example
An investor wanting to buy a $45 stock at $40 might sell a $40 put for $1.50, collecting premium now and potentially buying shares at an effective cost of $38.50 if assigned.
Risk & limitations
OCC disclosures note the seller remains obligated to buy at the strike even if the stock price falls well below that level, resulting in a loss relative to current market value.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.