Protective Put Vs Covered Call

Options when traded the usual way as a form of leverage to make money through the current trend of your stock is very risky in my personal opinion. However, options can also be used in a way that you can either protect your downside or make money with it. But before you implement any of these strategies, you've got to analyse your stock's fundamentals before purchasing to minimize your risks further, and of course for the amount of put or call option that you purchase, you should have the equivalent amount or more of the underlying stocks you wish to protect.

The protective put is like buying an insurance to guarantee the value of your stock. You pay a premium to buy the put option in order to ensure that no matter what happened, you can always sell your stock at the specified price.

The covered call allows you to make money when the value of your stock drops but you will make less money should the value of your stock appreciates (increase in price). You receive the premium for selling a call option on the stock that you are currently holding at a price that you think the stock should be valued by the end of a specified date. This price must of course be higher than your purchase price so that you do earn a profit from selling the stock. So in the event that the stock price really drops and the call option was never executed, you makes that premium. But in the event that the stock price increases to a price more that what you specified in that call option, you might need to sell your stock to the person that buys that call option. Which means, you will make less money in the process.

Normally, I won't use either but I would prefer protective put as it's best to protect the downside and let the upside take care of itself rather than limiting the upside and making money during the downside.