Covered Call vs Cash-Secured Put
Learn the key differences between covered calls and cash-secured puts to maximize your income trading while managing risk appropriately.
What is This comparison?
This comparison Covered calls and cash-secured puts are the two foundational income strategies in options trading, both benefiting from theta decay and range-bound markets.
While synthetically similar, they have different entry requirements, risk profiles, and are suited for different market outlooks.
Quick Comparison
| Feature | Covered Call | Cash-Secured Put |
|---|---|---|
| Max Profit | Premium + (strike - stock price) | Premium received |
| Max Loss | Stock price - premium | Strike price - premium |
| Break Even | Stock price - premium received | Strike price - premium received |
| Best For | Slightly bullish to neutral | Neutral to slightly bullish |
| Win Rate | 70-80% | 70-80% |
| Complexity | Beginner | Beginner |
| Capital Required | 100 shares of stock | Cash to buy 100 shares |
Feature-by-Feature Comparison
When to Use Covered Call
Use covered calls when you already own shares and want to generate income while willing to sell at a target price. Great for stocks you're happy to hold long-term.
Learn Covered CallWhen to Use Cash-Secured Put
Use cash-secured puts when you want to buy a stock at a lower price while getting paid to wait. Ideal for building positions in quality stocks over time.
Learn Cash-Secured PutThe Wheel Strategy Connection
Many traders combine both strategies in the Wheel: sell cash-secured puts until assigned, then sell covered calls until called away. This creates a systematic income approach that works in most market conditions.
Frequently Asked Questions
Is a covered call or cash-secured put better?
Neither is inherently better - they are synthetically equivalent with the same risk profile. Choose covered calls if you already own shares. Choose cash-secured puts if you want to acquire shares at a lower price. Many traders use both in the Wheel Strategy.
Can I do covered calls without owning stock?
No, covered calls require owning 100 shares per contract. If you sell calls without shares, it's a naked call with unlimited risk. For a similar strategy without owning stock, consider the Poor Man's Covered Call using LEAPS.
Related Strategies
Ready to test these strategies?
Try both Covered Call and Cash-Secured Put in our free strategy simulator with real market data.