Covered call basics
A covered call combines owned shares with a short call. The call premium provides income, but the short strike caps the shares’ upside if assignment occurs. The share position still has downside exposure.
For example, stock bought at $95 with a $105 call sold for $2 has a $93 effective basis before fees and a capped assigned gain through $105.
Cash-secured put basics
A cash-secured put reserves enough cash to buy shares if assigned. The premium lowers the effective purchase price, but it does not eliminate the risk of the underlying falling below that level.
Selling one $95 put for $2 generally reserves $9,500 and creates a $93 effective price before fees. That is a planning relationship, not a guarantee of an assignment outcome.
Assignment and risk
Both strategies may be assigned, and early exercise can matter around dividends or deep in-the-money options. Compare the premium to the maximum capital at risk rather than treating premium as a return guarantee.
Use the calculators to see break-even and assignment scenarios, then account for taxes, commissions, liquidity, and your own position limits.