Covered Calls vs Cash-Secured Puts
Investors looking for reliable options income often ask: “Should I write covered calls or cash-secured puts?” The truth is both strategies are conservative, income-focused, and often two sides of the same coin—but the right choice depends on your goals, cash position, and market outlook.
⚖️ Covered Calls vs Cash-Secured Puts at a Glance
| Feature | Covered Call | Cash-Secured Put |
|---|---|---|
| What you need | 100 shares of stock per contract | Cash set aside to buy 100 shares per contract |
| Income source | Premium from selling call | Premium from selling put |
| Best used when | You already own the stock but don’t mind selling at strike | You want to own the stock at a lower entry price |
| Risk profile | Downside limited only by stock decline; upside capped at strike | Downside if assigned is owning shares that fall further |
| Tax treatment (Canada) | Premium treated as capital gain adjustment if stock sold | Premium reduces adjusted cost base if shares assigned |
| Psychological fit | Good for investors already long stock | Good for investors waiting for a better entry |
📈 When Covered Calls Make Sense
- You already own a stock and want to generate extra monthly income.
- You’re neutral-to-slightly-bullish but willing to cap upside.
- You prefer consistent ROO and a stock you’re happy to part with if assigned.
💰 When Cash-Secured Puts Make Sense
- You have cash ready and want to buy quality stocks at a discount.
- You’re neutral-to-slightly-bearish and don’t mind assignment.
- You prefer income while “waiting” for a better entry price.
🧠 Final Tip
Both covered calls and CSPs can work together. Many investors pair them: writing puts to enter positions, then switching to covered calls once assigned. The key is matching the strategy to your market outlook and ensuring liquidity and ROO fit your plan. Tools like Optrader.ca help screen both strategies side by side so you can choose the one that matches your goals.
🛡️ Compare Covered Calls and CSPs on Optrader's Screener
⚠️ This article is for education only and not investment or tax advice. Policies can change; confirm details with your brokerage and a tax professional.
