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They are not equivalent positions. Selling covered calls has unlimited loss potential.
by trianglem 6y ago
They are not equivalent positions. Selling covered calls has unlimited loss potential.
- hi_hello 6y agoDo you mean selling uncovered calls? With a covered call your potential profit is capped, but you aren't exposed to the infinite risk of buying the stock (since you already own it) at a bananas price if it exceeds your strike. Selling covered calls can be a fine substitute for limit sells if used carefully. Assuming one is comfortable selling at the strike price, the covered call trickles a little profit in the meantime.