Making Money With Option Strategies

7 The Uncovered Put: Alternative to Covered Calls With Less Risk

The uncovered put often is perceived as a high-risk strategy. However, it contains identical market risks to those of the more popular covered call. There are numerous offsets in the comparison; the point, however, is that the uncovered put is just as conservative as the covered call.

This chapter describes hedging strategies using uncovered puts. A true hedge is opened to reduce risks on stock positions owned in the portfolio. So a conservative investor will not be as interested in an option-only strategy. However, some circumstances justify writing a put in place of a covered call or even along with a covered call at the same time.

A Comparison to Covered Calls

The uncovered put ...