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A protective option constructed with a put to cover shares of stock that an investor owns is called a protective put or married put, [1] [2] while one constructed with a call to cover shorted stock is a protective call or married call. [3] In equilibrium, a protective put will have the same net payoff as merely buying a call option, and a ...
Mildly bullish trading strategies are options that make money as long as the underlying asset price does not decrease to the strike price by the option's expiration date. These strategies may provide downside protection as well. Writing out-of-the-money covered calls is a good example of such a strategy. The purchaser of the covered call is ...
Payoffs from a short put position, equivalent to that of a covered call Payoffs from a short call position, equivalent to that of a covered put. A covered option is a financial transaction in which the holder of securities sells (or "writes") a type of financial options contract known as a "call" or a "put" against stock that they own or are shorting.
A covered call is a basic options strategy that involves selling a call option (or “going short” as the pros call it) for every 100 shares of the underlying stock that you own. It’s a ...
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The collar (finance) is a neutral-to-bullish strategy and consists of a combination of a covered call (see above) and a long put option for protection. The protective put provides insurance to guarantee a floor on the potential loss, but the protective put option also reduces the amount of potential return.
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A benchmark index for the performance of a buy-write strategy is the CBOE S&P 500 BuyWrite Index (ticker symbol BXM). Another very common strategy is the protective put, in which a trader buys a stock (or holds a previously-purchased long stock position), and buys a put. This strategy acts as an insurance when investing long on the underlying ...