Covered Call vs Cash Secured Put

Both strategies generate income from options premium, but they have different use cases and risk profiles.

Quick Comparison

| Factor | Covered Call | Cash Secured Put | You start withStockCash You sellCall optionPut option You want stock toStay flat or rise slightlyStay flat or fall slightly Best whenAlready own stockWant to buy stock RiskStock declinesAssigned at high price | Reward | Premium + limited upside | Premium + buy at discount |

When to Use Covered Calls

You already own the stock

You're willing to sell at the strike price

You want income from existing holdings

You're neutral to slightly bullish

When to Use Cash Secured Puts

You want to buy a stock at a lower price

You have cash waiting to be deployed

You're neutral to slightly bearish

You want income while waiting

Synthetic Equivalence

Mathematically, covered calls and cash secured puts are nearly identical:

Covered call = Long stock + Short call Cash secured put = Short put

Both have similar profit/loss profiles!

Using Both Together: The Wheel

The most powerful approach combines both strategies in the wheel:

Sell puts until assigned

Sell calls until called away

Repeat