Cash Secured Put Income Generating Stratergy
A cash-secured put is an income strategy where you sell a put option while keeping enough cash on hand to purchase the stock if assigned. This approach allows you to potentially buy stocks at a discount while earning a premium upfront. It’s ideal for investors looking to accumulate shares of quality stocks at lower prices, while getting paid to wait.
How It Works
- You select a stock you wouldn’t mind owning and sell a put option at a strike price you're willing to buy it at.
- You receive a premium upfront for selling the put.
- You set aside enough cash to buy 100 shares per contract if the option is exercised.
- If the stock stays above the strike price by expiration, the option expires worthless - and you keep the premium.
- If the stock drops below the strike price, you'll be obligated to buy it at that price - but you still keep the premium, effectively lowering your cost basis.
