---
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/optionstrading/covered-stock.md"
updated_at: "2025-10-10T08:14:31.000Z"
category: "optionstrading"
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/2025/c62a5a0be99404de67e8e591cafb2305)

-   Components

![](https://pub.pbkrs.com/uploads/2025/1d18ed8f35be2115c18559ad218a8658)

-   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/2025/6a7f8445ffd5d7dc065a2e23cbd32d78)

### 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/2025/5cd439fe25a1ac1b5cc8ae0e467fa7ba)

-   Components

![](https://pub.pbkrs.com/uploads/2025/a316a41b323ea74f685d23c93a2a3e30)

-   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/2025/52b2d2a728a75062a49364a1942c0d88)

### 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/2025/65515966495c632c23abf6147edd003d)

-   Components

![](https://pub.pbkrs.com/uploads/2025/1ef1d0582b28cf9b18272843dc74e8fb)

-   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/2025/f1801524d42a5763610f0801e06743c2)

### 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/2025/a593ab7036caa423783c4f1a3fff2e78)

-   Components

![](https://pub.pbkrs.com/uploads/2025/484277fa9c77115eaa3930ff7095c5b0)

-   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/2025/7fff7acb6cc1ef570745bb950a4bae45)

---

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