A cash-secured put (CSP) is an options strategy where you sell a put option on a stock while simultaneously keeping enough cash in your brokerage account to purchase 100 shares if the option is exercised. The cash acts as collateral — your broker "reserves" it so you cannot spend it until the put expires or is closed.
When you sell a CSP, you immediately receive the option premium in cash. In exchange, you take on the obligation to buy 100 shares at the strike price if the stock falls to or below that level at expiration.
In the wheel strategy, selling CSPs is the starting phase. You choose a strike price at which you would genuinely be comfortable buying the stock — then collect premium while waiting to see if you get assigned.
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