What is CSP in trading?

BTCC, a leading cryptocurrency exchange, offers a range of services that cater to various investment needs. Among its offerings are spot trading, futures trading, and a wallet service. Spot trading allows investors to buy and sell cryptocurrencies at current market prices, while futures trading provides access to Leveraged trading and hedging opportunities.

The cash-secured put strategy involves two primary actions. An investor writes a put option, which is a contract giving the right to sell a stock at a fixed price within a specified time frame.

Alongside writing the put option, the investor sets aside an amount of cash equivalent to the potential cost of purchasing the stock if the put option is assigned. This cash reserve ensures the investor has the financial means to fulfill the obligation if necessary.

The strategy's primary advantage lies in its potential to allow investors to acquire stock at a discounted price. If the market price of the stock falls below the strike price of the put option, the put may be assigned, enabling the investor to purchase the stock at a lower cost than its current market value.

It's crucial for investors employing this strategy to understand the risks involved. One significant risk is that the put option might not be assigned at all. This scenario would occur if the stock's price remains above the strike price throughout the option's duration.