The Covered Call
A covered call is two pieces at once: you own at least 100 shares of a stock, and you sell one call option against them. Selling that call brings in premium up front — cash you keep no matter what happens next.
The trade-off is your upside. If the stock climbs above the call's strike, your shares can be called away at that price, so you give up gains beyond it in exchange for the premium and any move up to the strike. It's a way to earn income on shares you're comfortable holding, not a way to chase a big rally.
The Cash-Secured Put
A cash-secured put is the mirror image: you sell a put option and set aside enough cash to buy 100 shares at the strike if you're assigned. You collect premium for taking on the obligation to buy.
Two things can happen. The stock stays above the strike and the put expires worthless — you keep the premium. Or it falls below the strike and you buy the shares at a price you chose in advance, with the premium lowering your effective cost. It suits someone who would be happy to own the stock at the strike anyway.
The Long Call
A long call is the simplest bullish options trade: you buy a call, paying a premium for the right to buy the stock at the strike before expiry. The premium is the most you can lose — your risk is capped and known the moment you enter.
The appeal is leverage with defined downside: the upside is uncapped as the stock rises, but for far less cash than buying the shares outright. The catch is time decay — the option loses value as expiry nears, so the move you expect has to be large enough and soon enough to outrun it.
The Long Put
A long put is the bearish counterpart: you buy a put, paying a premium for the right to sell the stock at the strike. It gains value as the stock falls below that strike, and your risk is again capped at the premium paid.
People use a long put in two ways: to profit from an expected decline, or to insure shares they own — a floor under the position if the stock drops. Like a long call, it fights time decay, so it works best when a meaningful move down is expected before expiry.
The Bull Call Spread
A bull call spread combines two calls: you buy a call at a lower strike and sell a call at a higher strike, both with the same expiry. The premium you collect on the short call offsets part of the cost of the long call, making the position cheaper than a single long call.
Risk and reward are both defined. Your maximum loss is the net amount you paid; your maximum gain is the distance between the strikes minus that cost, reached if the stock finishes at or above the higher strike. You trade away the uncapped upside of a lone long call for a lower cost and a clearer, bounded outcome.