---
title: "Covered Stock"
description: "1. Covered CallOverviewCovered call is an options strategy where you hold a long position in the underlying asset and sell a call option on it. This strategy helps offset downside risk while generating income from the premium.FeaturesComponentsProfit sourceUnderlying priceSourceRiseLong position value increasePremium from selling callsFallOffsetting stock decline with premiumCase studyLet's imagine a made-up company "
slug: "covered-stock"
locale: "en"
region: "hk"
region_label: "Hong Kong"
url: "https://longbridge.com/hk/en/support/topics/misc/covered-stock.md"
updated_at: "2026-03-25T08:49:10.000Z"
category: "misc"
category_title: "Options trading"
references:
  related:
    - title: "Vertical spread"
      url: "https://longbridge.com/hk/en/support/topics/optionstrading/vertical-spread.md"
    - title: "Collar"
      url: "https://longbridge.com/hk/en/support/topics/optionstrading/collar.md"
    - title: "Strangle "
      url: "https://longbridge.com/hk/en/support/topics/optionstrading/strangle.md"
    - title: "Straddle "
      url: "https://longbridge.com/hk/en/support/topics/optionstrading/straddle.md"
    - title: "Option Market Data Fields Introductions"
      url: "https://longbridge.com/hk/en/support/topics/optionstrading/op-fields-intro.md"
---

# Covered Stock

[Table of Contents](https://longbridge.com/hk/en/support/toc.md)

### 1\. Covered Call

-   Overview

Covered call is an options strategy where you hold a long position in the underlying asset and sell a call option on it. This strategy helps offset downside risk while generating income from the premium.

-   Features

![](https://pub.pbkrs.com/uploads/2026/1b508faa4bcf19db4694dbfa3badb65e)

-   Components

![](https://pub.pbkrs.com/uploads/2026/1a7ab1d7c029850a3ff1055b3ecf1db1)

-   Profit source

Underlying price

Source

Rise

-   Long position value increase
-   Premium from selling calls

Fall

Offsetting stock decline with premium

-   Case study

Let's imagine a made-up company called TECH.

Right now, TECH's stock price is $100 per share. You think the stock price won't move much in the near future, so you decide to use a Covered Call strategy.

You buy or already own 100 shares of TECH stock, and then you sell a Call option with a strike price of $105, collecting a premium of $3.

![](https://pub.pbkrs.com/uploads/2026/8b0e797352e26c8c632a6363b30a49cb)

### 2\. Covered Put

-   Overview

Covered put is an options strategy where you short the underlying asset and sell a put option on it. This strategy helps offset upside risk while generating income from the premium.

-   Features

![](https://pub.pbkrs.com/uploads/2026/1bda35811bf59d9a93ca98c51b84c7c7)

-   Components

![](https://pub.pbkrs.com/uploads/2026/3f38ee250ddeeedf105e47ab81a26de5)

-   Profit source

Underlying price

Source

Rise

Offsetting stock rise with premium from selling puts

Fall

Short position value increase

-   Case study

Let's imagine a made-up company called TECH.

Right now, TECH's stock price is $100 per share. You think the stock price won't move much in the near future, so you decide to use a Covered Put strategy.

You short or already hold 100 shares of TECH stock, and then you sell a Put option with a strike price of $95, receiving a premium of $2 for each share (totaling $200).

![](https://pub.pbkrs.com/uploads/2026/11bebd8b4aac70c9ae110e3ba18884f2)

### 3\. Protective Call 

-   Overview

Protective call is an options strategy where you short the underlying asset and buy a call option on it. This strategy helps limit potential losses if the asset's price unexpectedly rises.

-   Features

![](https://pub.pbkrs.com/uploads/2026/c5bc50eb09b6275bd826535d4d96df69)

-   Components

![](https://pub.pbkrs.com/uploads/2026/650face9e140cf4858eb3b3dffbcfa6e)

-   Profit source

Underlying price

Source

Rise

Offsetting stock rise with call value increase

Fall

Short position value increase

-   Case study

Let's imagine a made-up company called TECH.

Right now, TECH's stock price is $100 per share. You think the stock price will move upward in the near future, so you decide to use a Protective Call strategy.

You short or already hold 100 shares of TECH stock, and then you buy a Call option with a strike price of $105, paying a premium of $4 for each share (totaling $400).

![](https://pub.pbkrs.com/uploads/2026/17f197137f32a66419d2910241fd68f7)

### 4\. Protective Put 

-   Overview

Protective put is an options strategy where you hold a long position in the underlying asset and buy a put option on it. This strategy helps hedge against potential losses if the asset’s price falls.

-   Features

![](https://pub.pbkrs.com/uploads/2026/5e02635d24b461e2a523d0173da5f97f)

-   Components

![](https://pub.pbkrs.com/uploads/2026/bc3fbf53f2f7c9bd10e6c8d73348591d)

-   Profit source

Underlying price

Source

Rise

Long position value increase

Fall

Offsetting stock decline with put value increase

-   Case study

Let's imagine a made-up company called TECH.

Right now, TECH's stock price is $100 per share. You think the stock price will move downward in the near future, so you decide to use a Protective Put strategy.

You buy or already own 100 shares of TECH stock, and then you buy a Put option with a strike price of $95, paying a premium of $3 for each share (totaling $300).

![](https://pub.pbkrs.com/uploads/2026/88c4093d4c12e265fc9b50c0d2150a27)

---

> **Disclaimer**: This article is for reference only and does not constitute any investment advice. Content provided by [Longbridge](https://longbridge.com).