If you’ve ever said, “I’d buy that stock—just not at today’s price,” then you’re going to like the cash-secured put.
This strategy lets you get paid to wait. It’s simple, conservative, and perfect for income-focused investors who don’t want to chase stocks in an overheated market.
What Is a Cash-Secured Put?
A cash-secured put is a promise to buy a stock at a set price (strike price), by a set date—only if it drops to that level. In exchange for making that promise, you get paid up front (the premium). It’s called “cash-secured” because you set aside enough cash in your account to buy the stock if it hits your price.
When Would You Use This?
You want to generate income from your cash while you wait for a better entry point. You’re happy to own the stock only if the price drops. You prefer defined risk and slow, steady returns—not speculation.
Example:
Let’s say you’ve had your eye on Johnson & Johnson (JNJ), which is trading at $160. You’d love to own it—but only if it drops to $150. So you sell a $150 put option that expires in 30 days—and collect a $2.00 premium per share (or $200 total for 1 contract = 100 shares).
Here’s what could happen:
Scenario A: JNJ stays above $150
The option expires worthless
You keep the $200 premium
You can do it again next month
Scenario B: JNJ drops below $150
You’re assigned the shares and buy JNJ at $150
But you still keep the $200 premium
Your effective cost basis? Just $148/share
Either way, you win: you earn income, or you buy a quality stock at a discount.
Why Retirees Love It
It turns idle cash into monthly income It’s less risky than buying stock outright. It gives you control: you name your price. It fits perfectly in a conservative, income-focused plan
Quick Tip:
Stick with companies you’d genuinely want to own, and always have the cash ready to buy if assigned. That’s what makes the strategy stress-free.
Ready to Put Your Cash to Work?
At OptionsAction.com, we teach retirees how to turn market patience into monthly income using smart, conservative options strategies like the cash-secured put.
Want a step-by-step guide on how to set up your first trade?
