5.4.1 Speculative Strategies
When you buy or sell an option, you are speculating on the direction of the market and laying your assets on the table in the hope of making quick profits. Specifically, if you hold a put or call, you are anteing up a fixed portion of your assets hoping to win the jackpot. In contrast, if you write a put or a call, you choose to generate current income at substantial risk.
From a financial perspective, a covered put or call is less risky than a naked put or call, as we have seen. A covered call is the ownership of a security (long the security) combined with a written call option. An investor writes a covered call to earn income in the form of the premium. Because the investor owns the security, he is not put in the awkward position of having to find funds to buy the security