Cash-Secured Put
Writing a put while setting aside enough cash to buy the underlying if assigned.
Formula
Cash to Reserve = Strike x Lot Size; Effective Purchase Price if Assigned = Strike - Premium Received
Unit
₹
In depth
The structure is a short put with the assignment funded in advance, which removes the leverage but not the market risk — if the underlying falls to half the strike, the writer still buys at the strike and holds the loss. It is often described as being paid to wait for a lower entry price, which is fair only when the writer genuinely wants the shares at that level and would not have preferred to buy them outright after a larger fall. The premium caps the benefit while the downside runs almost to zero. It is the same payoff shape as a covered call, funded differently.
Worked example
Write a 480 put for ₹10 on a lot of 1,000 and reserve ₹4,80,000. If assigned, the effective cost is ₹470 a share. If the stock falls to ₹300, the position is worth ₹3,00,000 against ₹4,70,000 committed.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Cash-Secured Put” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.