Cash Secured Put

A cash secured put is a conservative income-generating strategy that involves selling put options while maintaining sufficient cash reserves to purchase the underlying stock if assigned, making it ideal for investors seeking to acquire quality stocks at discounted prices while generating immediate income. This fundamental strategy combines the benefits of value investing with options income generation, allowing investors to get paid while waiting to buy stocks at their desired price levels. The strategy is particularly effective when investors have identified stocks they want to own but prefer to purchase them at lower prices, essentially getting paid to place a limit order. Professional money managers use cash secured puts as part of systematic income generation programs and strategic entry strategies for long-term equity positions. The cash requirement ensures the investor can fulfill the obligation if assigned, making it a responsible and conservative approach to options trading. The strategy works best in sideways to moderately bullish markets where the put expires worthless, allowing the investor to keep the premium while potentially repeating the strategy. Risk management involves selecting appropriate strike prices based on technical support levels and fundamental valuation metrics

If NIFTY is at ₹25,800, set up: Sell ₹25,400 Put for ₹35 while maintaining ₹25,400 in cash reserves, collecting ₹35 premium with obligation to buy NIFTY at ₹25,400 if assigned, creating effective purchase price of ₹25,365 if assignment occurs.