Buy Put Sell Call Strategy Guide

: You want exposure to a stock's movement but prefer to keep your cash liquid or use significantly less margin than a traditional stock purchase. 3. The "Wheel" Strategy (The "Income" Strategy)

This strategy is used by traders who do not own the stock but want to mimic its performance with very little capital. : buy put sell call strategy

: You have significant gains in a stock and want to protect them through a period of high uncertainty (like an earnings report) without selling your shares. 2. Synthetic Long Stock (The "Leverage" Strategy) : You want exposure to a stock's movement

This is most common for investors who already own a stock and want to protect against a crash without paying a high premium for insurance. : Own the underlying stock (e.g., 100 shares). : : You have significant gains in a

: If the stock drops and you are forced to buy it, you then sell a call (covered call) against those new shares to continue earning income until the stock is eventually "called away" at a profit. Comparison Summary Components Primary Goal Risk/Reward Profile Protective Collar Long Stock + Buy Put + Sell Call Hedging Limited downside, limited upside. Synthetic Long Buy Call + Sell Put Leverage Unlimited upside, significant downside. The Wheel Sell Put (then) Sell Call Income Collect premiums at every stage.

While slightly different, this is a popular cycle that involves alternating between selling puts and calls.