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Cash Secured Put
A cash secured put involves selling a put while setting aside sufficient cash to meet the purchase obligation if assigned under the intended contract structure.
Why it matters to you
It is often used when a trader is willing to buy the underlying at the strike price while receiving premium for taking on that obligation. The premium does not eliminate downside risk. If the underlying collapses far below the strike, the trader may still be required to purchase it at the strike if assigned.
Terms that sit next to this one
Short Put, Option Premium, Cash Secured