Identifier: C4T5L2 | Revision: 2026-10-26 | Planned study: 10–15 minutes, excluding extended practice.

Decision and objectives

Choose whether the method addresses this lesson’s task before placing an order. Objectives: 1. Calculate reserved cash and effective acquisition cost. 2. Reconcile assignment with a falling asset. 3. Distinguish secured funding from protected principal.

Prerequisite: C4T5L1.

All numbers, quotes, contract terms and dates in the case are hypothetical teaching assumptions, not a listed series or offer. Unless varied below, options are European, expire together in 90 calendar days, are cash settled in TRY, and use 100 underlying units per contract. Premiums are TRY per underlying unit, paid at entry; signed quantities identify long (+) and short (−) legs. Assume no distributions and zero financing for the isolated payoff, no holiday adjustment, and final cash on the next business day. Actual tax is excluded, not assumed zero.

Mechanics

A cash-secured put sells a put while reserving the strike cash needed to purchase the deliverable. It is a contingent acquisition commitment. Override the standard case to a European physically delivered put. At exercise the writer pays strike cash and receives shares; before exercise no shares are owned and no dividends or votes accrue. A cash-settled alternative pays the negative difference and does not acquire the desired holding. Funding is secured; economic value is not protected.

Price and return drivers

Cash reserve = contracts × multiplier × strike. If assigned, effective acquisition cost per unit = strike −premium +costs per unit, excluding interest earned or paid unless supplied. Maximum loss at underlying zero is reserve −premium +costs. The writer should want the asset under adverse facts, not just at the original forecast. The strategy does not guarantee acquisition: above strike the put may lapse, leaving cash and premium but no shares.

Worked case

Sell1 synthetic physical putK100 at premium5, multiplier100; total costs20 and zero reserve return for comparison. ReserveTRY10000. At expiryS80, assignment buys100 shares for10000, now valued8000. Net economic result=8000−10000+500−20=−1520. AtS100, assuming no exercise under the supplied case, result480 with cash still reserved until release. AtS120, result480 but shares were not acquired and the desired asset rose. Effective assigned cost95.20 per share; maximum loss9520 at zero.

Adverse case

Before expiryS85, supplied put close ask17 costs1700; net realized result=500−1700−20=−1220. Holding the strike reserve avoids forced liquidation from lack of purchase cash but cannot erase that loss. If a trading halt prevents a share sale after assignment, the investor may remain exposed. AtS0,S80,S120 the net terminal states are−9520,−1520,+480. A reserve released after settlement is not necessarily available on the contractual purchase date; operational timing must be checked.

Practical use

Keep the full strike reserve available through purchase settlement and account release. Confirm whether the actual put delivers shares; a cash-settled family cannot deliver the intended acquisition.

For any actual domestic implementation, verify the exact issue/contract, authorized intermediary, account permission and executable size. Include spread, commissions, passed-through fees, funding/borrow, custody and exercise/exit costs without double-counting embedded charges. Recheck income year, residency/status, issue/acquisition dates and effective tax law; all case results remain before actual tax.

Decision boundaries

Use a cash-secured put when the investor accepts ownership at the effective cost and can leave the reserve unavailable through settlement. Compare a limit order: it does not have the same premium or binding contingent obligation. Decline if the investor only wants current income or must spend the reserve before expiry. Retain cash if ownership under the stressed scenario would violate concentration or liquidity limits. For actual instruments, confirm physical settlement and the precise exercise process rather than borrowing the synthetic convention.

Practice and references

Exercise: sell2 physical putsK60 at premium3, multiplier100, total costs40. Solution: Required reserve12000. Effective assigned cost=60−3+40/200=57.20. AtS40 share value8000, net result8000−12000+600−40=−3440. Maximum loss at zero11440. The4000 loss on the shares is partly offset by premium but remains large.

Takeaway: Cash securing a put finances acquisition at strike; it does not protect the acquired asset’s market value. Reference links: product card, formula; glossary: Cash secured put; Assignment reserve. Next: C4T5L3. Topic test.

Sources: Borsa Istanbul: Options (retrieved 2026-10-26; General information and basic concepts). Borsa Istanbul: Settlement Method (retrieved 2026-10-26; Settlement by contract family). Options Industry Council: All Strategies (retrieved 2026-10-26; Strategy descriptions). GIB: Provisional Article67 Guide for Individuals (retrieved 2026-10-26; Sections1,3–9 and19; publication introduction). Revision 2026-10-26; recheck changing terms before publication.

Shared reference guide