← BeginnerLesson 23 · 4:58
Cash-secured put (strategy)
Summary
You can work out a cash-secured put's net buying price, break-even and worst case with plain arithmetic before you sell. You know how much cash must be set aside and that it stays tied up while the trade is open. You can see why the best ending is small beside the worst case.
Key terms
- cash-secured put
- Selling a put while setting aside the strike times 100 in cash to buy the shares if you're asked.
- secured
- net buying price
- The strike price minus the premium you received, if you're made to buy the shares from a sold put.
Check yourself
Answer each question to see why the right answer is right.
1. XYZ is at $100 and you sell one 30-day put with a strike of $95 for $141. How much cash must you set aside?
2. If you're made to buy the shares, what is your net buying price?
3. XYZ shoots up to $120 by the last day. What is your result?
4. XYZ finishes at $90 and you're assigned. Where are you?
5. What is the worst case on this trade?
Finished the video and the quiz? .