: If the stock drops and you are forced to buy it, you then sell a call (covered call) against those new shares to continue earning income until the stock is eventually "called away" at a profit. Comparison Summary Components Primary Goal Risk/Reward Profile Protective Collar Long Stock + Buy Put + Sell Call Hedging Limited downside, limited upside. Synthetic Long Buy Call + Sell Put Leverage Unlimited upside, significant downside. The Wheel Sell Put (then) Sell Call Income Collect premiums at every stage.
: You want exposure to a stock's movement but prefer to keep your cash liquid or use significantly less margin than a traditional stock purchase. 3. The "Wheel" Strategy (The "Income" Strategy) buy put sell call strategy
This is most common for investors who already own a stock and want to protect against a crash without paying a high premium for insurance. : Own the underlying stock (e.g., 100 shares). : If the stock drops and you are