An investor faced with a profitable long position in a stock might seek out options strategies designed to both create a stream of income, while simultaneously protecting against adverse movements in the price of the underlying stock. This lesson introduces basic options principles to discuss the covered call position and a protective put position, which together with the initial long stock position create an options collar.
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Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by clicking the link below. Multiple leg strategies, including spreads, will incur multiple transaction costs. https://www.theocc.com/companyinform...