Covered Stock

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

• Components

• Profit source

• 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.

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

• Components

• Profit source

• 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).

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

• Components

• Profit source

• 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).

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

• Components

• Profit source

• 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).