Earn income on what you already own, hedge what you cannot afford to lose, and control more with less, using covered calls, LEAPS, strangles and collars on liquid markets.
A trade we run on our own gold position: 100 shares, and a call option sold 20% above the purchase price. Here is what that does, in plain numbers.
01
Buy 100 shares
A gold ETF at $300: $30,000 of exposure to gold.
02
Sell one call, 20% higher
The buyer gets the right to take your shares at $360 any time in the next year. You are writing them a policy on gold's upside.
03
Keep the premium, whatever happens
$900 lands in your account today. It is yours whether gold rallies, stalls or falls.
In plain words: if gold rises more than 20%, you have “lost” the extra, but you still bank the full 20% and the premium. If gold falls, the premium offsets the first 3.0% of the drop, and you are not worried unless the fall is a big one. That is the trade-off: a little upside you probably were not going to get, sold for income you definitely do.
Profit at expiry, one year out
Gold ETF · bought at $300
100 shares + call sold at $360100 shares alone
Five ways the year can end
Gold+30%
Covered call+$6,900
Shares alone+$9,000
Sold at $360. You keep the 20% and the premium; the last 10% belonged to the buyer.
−$2,100: upside sold
Gold+10%
Covered call+$3,900
Shares alone+$3,000
Below the strike: you keep the shares, the whole rise and the premium.
+$900 vs holding
GoldFlat
Covered call+$900
Shares alone$0
A flat year still pays. The premium is the return.
+$900 vs holding
Gold−10%
Covered call−$2,100
Shares alone−$3,000
The premium softens the fall. You lose less than the shareholder.
+$900 vs holding
Gold−30%
Covered call−$8,100
Shares alone−$9,000
A crash still hurts. A cushion is not a floor: that is the put's job.
+$900 vs holding
Illustrative prices: a $9-a-share premium on a one-year call. The real quote depends on the day's option chain. Breakeven at expiry is $291, and the best case is +$6,900.
The playbook
Three Structures We Use Every Week
Each one is the same idea, applied differently: decide which risk you want to keep, which you want to sell, and which you want to insure.
The strategy at expiry 100 shares aloneGreen: profit · Red: loss
Income · cushionCore playbook
Covered Call
You own 100 shares and sell someone the right to buy them from you at a higher price. They pay you a premium today for that right: you are the insurer, paid up front.
It rallies past the strike. Your shares are sold at the strike. You keep every dollar of gain up to it, plus the premium. Only the move above is given away.
It goes nowhere. The option expires worthless. You keep the shares and the premium, so a flat year still pays.
It falls. The premium offsets part of the fall. A deep drop still hurts, which is what pairing it with a put fixes.
Best when: You hold liquid shares you would be content to sell at the strike, and expect steady or modestly rising prices.
Leverage · stock replacementCore playbook
LEAPS
A call option that runs for two or three years. You pay a fraction of the share price for control of 100 shares: like a deposit that locks in a purchase price for years, and the rest of your capital stays free.
It rallies. You make close to what the shareholder makes, dollar for dollar, on a fraction of the money: the return on capital is several times larger.
It goes nowhere. The time value you paid melts away slowly, so a flat stock costs you part of the premium.
It falls. Your loss can never exceed what you paid, however far the stock falls, but a large fall can take all of it.
Best when: You hold a high-conviction, multi-year view on a liquid name and want the capital for other positions or as dry powder.
Income · accumulateCore playbook
Covered Strangle
You own 100 shares and sell two policies at once: a call above the price (someone may buy your shares) and a put below it (you may have to buy 100 more). Two premiums for one position, with cash set aside for the second lot.
It rallies. The shares are called away at the upper strike. You keep the gain up to it and both premiums.
It stays in the range. Both options expire worthless and you keep both premiums: the best result this structure has.
It falls. You buy a second 100 shares at the lower strike, cheaper than you started, with both premiums lowering your average cost. The catch: you now own 200 shares on the way down.
Best when: A name you would happily own more of at a lower price, in a market you expect to range rather than trend.
And the rest of the toolkit
Floors, fences and paid-to-wait entries
The same building blocks, arranged for protection or for entering a position on your terms.
Protection · floor
Protective Put
Here you buy the insurance rather than sell it. A put gives you the right to sell your shares at a set price, however far the market falls. You pay a premium, like any policy.
It rallies. You keep all of the upside, less the cost of the policy.
It goes nowhere. You lose the premium: the price of having been insured.
It falls. Your loss stops at the put strike. Every dollar below it is the put's to pay.
Best when: Protecting a large gain or a concentrated holding through an earnings date, an election or a shaky market.
Protection · fence
Collar
Buy a put for a floor and pay for it by selling a call for a ceiling. Insurance that costs little or nothing, in exchange for giving up gains above the cap.
It rallies. You keep the gain up to the call strike; the shares are sold there.
It goes nowhere. The two premiums roughly cancel, so standing still costs close to nothing.
It falls. Your loss stops at the put strike, the same floor as a protective put, at a fraction of its cost.
Best when: You want to stay invested after a strong run but cannot afford a large fall, and will trade the top of the range for it.
Income · entry
Cash-Secured Put
You sell insurance on shares you do not own yet. The cash to buy 100 shares at a lower price sits ready, and you are paid a premium to wait.
It rallies. The put expires worthless. You keep the premium, though you never got the shares.
It goes nowhere. You keep the premium, a yield on cash that was waiting anyway.
It falls. You buy the shares at the strike, net of the premium: a lower entry than when you started.
Best when: Building a position in a stock you want, at a price you choose, and getting paid while you wait.
Hedging intelligently
Reshape the Year Before It Happens
A hedge does not predict the market. It decides in advance what happens to you in each case. Here is the same gold position, four ways, across five ways the year can end.
Profit or loss on 100 shares of a gold ETF bought at $300, by structure and by where gold finishes
If gold finishes…
−30%
−10%
Flat
+10%
+30%
Shares aloneNo hedge
−$9,000
−$3,000
$0
+$3,000
+$9,000
Covered CallSell the $360 call
−$8,100
−$2,100
+$900
+$3,900
+$6,900
Protective PutBuy the $270 put
−$3,420
−$3,420
−$420
+$2,580
+$8,580
CollarBuy the $270 put, sell the $335 call
−$2,730
−$2,730
+$270
+$3,270
+$3,770
100 shares of a gold ETF bought at $300, profit or loss at expiry. Illustrative premiums: $9 for the $360 call, about $4 for the $270 put, about $7 for the $335 call.
Read down any column. In a crash the put and the collar hold the loss near $3,000 where the shares lose $9,000; in a flat year only the covered call is paid. None of them is free: each gives up one outcome to improve another.
A cushion
Covered call
Income that absorbs small falls and pays in flat markets. Cheap to run, but it softens a drop rather than stopping it.
A floor
Protective put
A hard limit on the loss, with all the upside kept. You pay for it, so we buy it for specific risks and specific windows.
A fence
Collar
The floor, paid for by selling the ceiling. Close to free protection for a position you want to keep but cannot afford to see fall.
The non-negotiable
Only Where the Market Is Deep
Selling insurance only works if someone is buying it. On large, heavily traded assets there are thousands of buyers and sellers at every strike. On small names there is often nobody, and you pay for that on every trade.
Deep marketGold ETF · 1-year call
PriceContracts offeredSize$9.001,350$8.992,100$8.981,800Spread $0.02 · 0.2% of the option’s value$8.962,400$8.951,650$8.941,200
Sell one call at the bid and you receive $896 against a fair value of $897: 0.1% lost to the market-maker. Thousands of contracts wait on each side, so you can close or roll any day.
Thin marketSmall-cap stock · 1-year call
PriceContracts offeredSize$1.204$1.052$0.903Spread $0.35 · 48.3% of the option’s value$0.555$0.4010$0.252
Sell one call at the bid and you receive $55 against a fair value of $73: 24% gone before the stock has moved. Closing early costs the same again, and only a handful of contracts are on offer.
Options volume
Thousands of contracts a day in the expiry we trade, not dozens.
Open interest
At least a thousand open contracts at the strike, so someone is always on the other side.
Tight bid–ask
A spread within a few percent of the option's value. Wider, and the premium is gone before the trade starts.
Dense strikes & expiries
Weekly or monthly expiries and closely spaced strikes, so a position can be rolled precisely.
A liquid underlying
Heavy share volume too, so assignment or a hedge adjustment never moves the price against you.
Event calendar
Earnings, dividends and macro dates mapped against every expiry before the trade is placed.
Gold, broad index funds and the largest listed companies pass every one of these. Most small caps fail several, and that is where we say no, however tempting the premium looks.
Learn it step by step
See How Each One Works
Pick a strategy and we will walk you through it one step at a time, on a simple $100 stock. When it clicks, try it with your own numbers.
Step 1 of 7
Start with 100 shares
“I own 100 shares at $100 each. That is $10,000 of stock.”
Here is how to read the chart. Along the bottom is where the stock price ends up; up the side is what you make or lose. The dashed line is simply owning the shares: the stock goes up, you make money; it goes down, you lose.
Your profit or loss
The simulator opens when you finish the steps.
Working together
From Your Holdings to a Hedged Book
One-to-one consultancy on your own positions: we design the structure with you, explain every leg, and stay on it.
01
Review your book
What you hold, what you would sell, what you cannot afford to lose, and which positions have liquid options at all.
02
Design the overlay
Strikes, expiries and sizes chosen against your targets, each option checked against its Black–Scholes fair value, and every outcome laid out the way this page lays them out.
03
Execute & roll
Placed at or near mid, and rolled ahead of expiry, earnings and ex-dividend dates rather than left to chance.
04
Monitor the risk
Exposure, assignment risk and premium income reported, so you always know what the position is doing.
Covered calls & strangles
LEAPS & stock replacement
Protective puts & collars
Income on idle cash
Get In Touch
Talk to Us About Your Holdings
Tell us what you hold and what you are trying to protect or earn. We will come back with the structures that fit, and the numbers behind each one.
