Income Strategies: Covered Calls & Cash-Secured Puts
Two defined-risk ways to collect option premium against stock you own or cash you've set aside — plus an honest look at what you give up and what can go wrong.
Selling options to collect premium is the most common "income" approach in options, and two structures dominate because they are fully collateralized — you have already set aside what you might be obligated to deliver. They lean on the same idea from the IV lesson: option sellers are, on average, paid a small premium for taking volatility risk. The key word is risk — these are conservative as option-selling goes, but they are not free yield.
Covered calls
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