A cash-secured put is a short put with the full cash reserved to buy 100 shares per contract at the strike if assigned. The premium is kept either way; assignment converts the reserve into stock at the chosen strike.
Selling a put creates an obligation to buy 100 shares per contract at the strike if the put is exercised. A cash-secured put sets the full purchase price aside in cash for the life of the trade, so assignment is a planned purchase rather than a margin event. That reservation is what separates it from naked put selling.
A $50 stock with 35 days to expiration and a flat 32% implied volatility (model prices). Selling the 47.50 put collects about $0.87.
| Stock at expiration | What happens | Profit or loss |
|---|---|---|
| $55 | Put expires worthless | +$87 |
| $47.50 | Put expires worthless | +$87 |
| $46.63 | Assigned at $47.50; shares worth $46.63 | $0 |
| $45 | Assigned at $47.50; shares worth $45 | -$163 |
| $40 | Assigned at $47.50; shares worth $40 | -$663 |
If assigned, the effective cost of the shares is the $46.63 breakeven, about 7 percent below the stock's price when the put was sold.
The entry rule that premium never overrides is willingness to own the stock at the strike. Published practice commonly targets around 0.20 to 0.30 delta with 30 to 45 days to expiration. A cash-secured put is the first state of the wheel: assignment leads to selling covered calls on the shares.
A put credit spread sells the same put and buys a lower one, capping the loss at the width minus the credit and tying up far less capital, in exchange for less premium and no plan to own the shares. The side-by-side numbers are in put credit spread vs cash-secured put.
The strike times 100 per contract, held for the life of the trade. A 47.50 put sets aside $4,750, which is exactly what buying the shares would cost if the put is assigned.
The seller buys 100 shares per contract at the strike with the cash already reserved, and keeps the premium. The effective cost of the shares is the strike minus the premium, which is also the trade's breakeven.
The strike minus the premium, times 100 per contract, reached only if the stock goes to zero. Below the breakeven the position loses like owning the shares; the premium cushions only the first part of a decline.