A cash-secured put is an options strategy where you sell a put option on stock you’re willing to buy, while keeping enough buying power in your account to cover the purchase of the underlying shares if assigned. If the stock stays above the strike price, you keep the premium as it’s unlikely the purchaser will exercise the contract. If it falls below the strike price, you may be assigned and required to buy the stock at that price.
If you want to remove the risk before expiration or assignment, you can buy back the option on the open market (“buy to close”). This ends your obligation.
Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Options Disclosure Document. Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.