§ 01
| Covered Call | Protective Put | |
|---|---|---|
| You hold | 100 shares + short 1 call | 100 shares + long 1 put |
| Objective | Generate income | Insure against downside |
| Premium | You receive it | You pay it |
| Upside | Capped at strike | Unlimited (minus put cost) |
| Downside | Stock loss minus premium | Limited at put strike |
| Market view | Neutral to mildly bullish | Bullish but nervous |
§ 02
Covered calls are the most popular options strategy among individual investors. They work best in flat or mildly bullish markets. In strong bull markets, you leave money on the table. In bear markets, the small premium barely cushions the loss.
§ 03
Covered Call Yield = Premium / Stock Price × (365 / Days to Expiry)
§ 04
Find a stock you own and price out a covered call 5–10% above the current price. Calculate the annualized premium yield. Compare it to the stock’s dividend yield.
§ 05
You’ve been selling monthly covered calls for 2% premium per month. The stock surges 20% this month. What happened?
§ 06
§ 07
You own 100 shares of AAPL at $200. Sell a $210 covered call for $3 premium. AAPL surges to $250 at expiry. P&L vs holding stock outright?
Five questions · AI feedback
Sit with the ideas.
You own 100 shares of XYZ at $100. You sell a $110 call expiring in 30 days for $2. At expiration, XYZ is at $115. What is your total return?
Why: