4 ms·

I'm not able to follow the logic. Why is it safer? Isn't the exposure from the options additive to holding stock?

• jeffbee 6y ago
  Yes the exposure is much worse. If you are long a stock you can sell it whenever you feel like it is about to lose value. When you sell covered options you may be forced to hold the stock until the contract expires. That’s the whole point of the call: the buyer pays you the premium and in exchange you are taking all of the risk for the duration of the contract.
  • pashamur 6y ago
    You can actually buy the call back whenever as long as someone is selling (which market makers generally are) to exit the position - you don't have to wait until expiration.
• tempsy 6y ago
  no it’s not. i’m talking about covered calls which is where you sell a call against your shares. you collect the premium from the option in exchange for potentially limited upside if your sold call goes in the money at the time of expiration.