It stands for collateralized put-write; an options trading strategy that involves short positions in put options and the use of the underlying stock as collateral. More specifically, this strategy is constructed by writing (selling) put options, while holding Treasury bills (T-bills) in a quantity that matches the notional value of underlying shares. By nature, put-writes (short puts) has a long exposure to the underlying stock, and hence, the strategy’s profits are capped at the amount of the put premium and the interest earned on the T-bills used as collateral.
This strategy is always profitable in bullish markets.
