Covered calls and cash-secured puts are the two most popular income trades, and they have nearly identical payoff profiles. The real difference is simply whether you already own the stock — which makes choosing between them easy once you understand the link.
Open the Covered Call calculator →A cash-secured put pays you to potentially BUY a stock at the strike; a covered call pays you while you HOLD it and may sell it at the strike.
At the same strike and expiration, a cash-secured put and a covered call have the same risk and reward — they are synthetically equivalent positions, just entered from different starting points.
If you do not yet own the stock but would like to at a lower price, sell a cash-secured put and get paid to wait.
If you already own 100 shares and want income (and are willing to sell higher), sell a covered call. Together they form the wheel: sell puts until assigned, then sell calls until called away.
A cash-secured put requires cash set aside to buy the shares; a covered call requires you to already hold the shares. The buying-power commitment is similar in size.
Tax treatment can differ by account and jurisdiction — assignment creates a stock position with its own cost basis, so consider the tax angle as well as the payoff.
At the same strike and expiration, neither — their payoffs are identical. The choice is about whether you currently own the shares.
Both carry essentially stock-like downside minus the premium. A cash-secured put simply delays ownership until assignment.
Yes — that is exactly what the wheel does, rotating from cash-secured puts into covered calls after assignment.
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