: Collects a premium that helps pay for the put.
: Provides a "floor" price where you can sell your stock if it crashes. buy put sell call strategy
: 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) : Collects a premium that helps pay for the put
: This position behaves almost exactly like owning the stock. If the stock goes up, the long call gains value; if it goes down, the short put loses value (similar to owning shares that drop in price). This strategy is used by traders who do
This strategy is used by traders who do not own the stock but want to mimic its performance with very little capital. :
While slightly different, this is a popular cycle that involves alternating between selling puts and calls.
: This creates a "price bracket." Your risk is capped by the put's strike price, but your potential gain is also capped by the call's strike price. If the premium from the call exactly matches the cost of the put, it is known as a zero-cost collar .