Cash Secured Puts

A cash-secured put involves selling a put option while simultaneously setting aside enough cash to purchase the underlying asset if assigned. The seller collects the premium for taking on the obligation to buy the asset at the specified strike price.

This strategy is often used by investors who are willing to accumulate an asset at a lower price point. If the asset price remains above the strike, the option expires worthless, and the seller retains the premium.

If the price falls below the strike, the seller is required to buy the asset at the strike price, effectively lowering their cost basis. In the crypto space, this is a popular method for entering positions in volatile assets during market dips.

It provides a way to earn yield while waiting for a desired entry price. The primary risk is the asset's price falling significantly below the strike, resulting in a paper loss.