🛡 Covered & Protective

You own 100 shares and simultaneously sell an OTM call option on them. The premium is immediate income but caps your upside at the strike.

When to use: You hold a stock long-term and expect no strong price appreciation in the next option period. Classic income strategy ("renting out your shares").

What really happens at assignment

Scenario: You own 100 AAPL at $170 (cost basis) and sold a call with strike $185. AAPL closes on expiration day at $190 — in the money (ITM) from the call's perspective.

1. Saturday morning: Broker automatically removes your 100 AAPL shares from the account.
2. Cash credit: 185 × 100 = $18,500 is credited to your account. The call premium (e.g. $3.00/share = $300) stays in your pocket on top.
3. Effective profit per share: (185 − 170) + 3.00 = $18.00 per share = $1,800 total. You miss the move above $185 — that is the price of the strategy.
4. What now? If you want to keep trading AAPL: sell a new CSP on AAPL (Wheel strategy back to start), or use the cash for another underlying.

👉 Further reading: Ch. 9.0 explains the Wheel strategy.

💡 In sTraderZ.com automatically recognised as "Covered Call" (📉 Bearish) when you hold 100 shares + 1 short call.

You are short a stock and simultaneously sell an OTM put option. The counterpart to the covered call for short positions.

When to use: You hold a short stock position and expect no strong downward price movement. Less common in practice than the covered call.

💡 sTraderZ.com recognises Covered Put when a short stock position + short put on the same underlying are present.

Like a short put, but you hold the required cash (Strike × 100) ready to actually buy the stock if exercised. This makes the strategy fully covered.

When to use: You want to buy a stock at a discount and get paid premium for it. "I'm willing to buy Apple at $95 — pay me $3 for the obligation."

💡 sTraderZ.com automatically recognises CSP when a cash account + short put is documented. Appears as "Cash-Secured Put" (📈 Bullish).

You simultaneously buy 100 shares and a put option on them. The put acts like insurance: if the stock falls, the put limits your loss to Strike − Purchase Price + Premium.

When to use: You buy a stock and want to protect against sharp losses (e.g. before earnings). "Buying shares with a safety net."

💡 sTraderZ.com recognises Married Put as a stock position + long put on the same underlying (📈 Bullish).

The counterpart to the Married Put: you hold a short stock position and buy a call option as insurance against rising prices.

When to use: You are short a stock and want to protect against sudden price spikes.

💡 sTraderZ.com recognises Protective Call as a short stock position + long call (📉 Bearish).

You hold 100 shares, buy an OTM put (downside protection) and finance it by selling an OTM call (upside cap). Often zero-cost or low net cost.

When to use: You want to cheaply hedge an existing stock position without deploying much capital. Popular with large positions or ahead of uncertain periods.

💡 sTraderZ.com automatically recognises Collar as Stock + Long Put + Short Call on the same underlying (↔️ Neutral).