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How do Cash Secured Put Options work?


When you sell a cash secured put, you receive a premium from the buyer, which is the price they pay for the right to sell the underlying asset to you at a specified price (the strike price) before the expiration date. If the asset's price falls below the strike price, the buyer may choose to exercise the option, and you would have to buy the asset at the strike price. To protect against this scenario, you set aside enough cash to purchase the underlying asset.

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