O'Reilly logo

The Option Trader’s Work Book: A Problem-Solving Approach, Second Edition by Jeff Augen

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

3. Covered Puts and Calls

Covered positions are used by conservative investors who are willing to accept a cap on their maximum gain in return for a hedge that can offset potential losses. Covered calls—long stock combined with short calls—are the most popular and best understood. Many investors find that covered calls are more profitable than simple long stock positions when the tendency is to hold the stock for a long period.

Bearish investors often take the same approach by shorting a stock and selling puts. As we will see, covered put positions display trading dynamics that are very different from their covered call counterparts. Most of the difference is related to spikes in implied volatility that often occur when a stock suddenly falls. ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required