Covered calls and protective puts

Combining options with what you own

Professional - Gold & Platinum

In this lesson

Build covered calls and protective puts, and calculate their break-even, maximum profit and maximum loss.

Key takeaways

• Covered call = own the asset + sell a call: income, upside capped at the strike.
• Covered call max profit = (strike − entry) + premium; break-even = entry − premium.
• Protective put = own the asset + buy a put: losses capped below the strike.
• Protective put max loss = (entry − strike) + premium; break-even = entry + premium.

Next lesson: Vertical spreads

Educational information only - not financial advice.