Question

What's the difference between 1. Normal put and protective put 2.Normal call and covered call

Answer 1

The put option gives the right to sell the underlying at an agreed price on a before a particular date. Put option increases in value as the underlying falls in price and lose value as the time to expiration nears. We are not holding the asset in this case

A protective put is a hedging strategy that involves holding a long position in an underlying asset and purchasing a put option with a strike price equal to close to the current price of the underlying asset. It is also known as a synthetic call.

A call option is a contract that gives the buyer, or holder, a right to buy an asset at a predetermined price by or on a predetermined date

A covered call is an options strategy that consists of selling a call option that is covered by a long position in the asset. This strategy provides downside protection on the stock while generating income for the investor.