Canadian Securities Course (CSC) Level 1 Practice Exam

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What is a cash secured put?

Writing a put without having cash reserves
Writing a put with less cash than the put value
Writing a put with cash put aside to cover its potential assignment
Buying a put using cash reserves

The correct answer is: Writing a put with cash put aside to cover its potential assignment

A cash secured put is an options strategy where the investor writes a put option while also setting aside enough cash to buy the underlying asset if the option is exercised. This strategy is considered less risky than writing a put without cash reserves (option A) or with less cash than the put value (option B) because it ensures that there are funds available to fulfill the obligation if the option is assigned. Buying a put using cash reserves (option D) is a different options strategy where the investor pays for the right to sell the underlying asset at a specific price within a specified time frame.