The safest option strategy is one that involves limited risk, such as buying protective puts or employing conservative covered call writing1. Here are the strategies that are considered safe:
- Protective Puts: Buying protective puts allows traders to limit their potential losses if the market declines. The puts provide insurance and can be purchased for a relatively low cost.
- Conservative Covered Call Writing: In this strategy, traders sell call options on an asset they already own. If the asset's price remains stable or increases, the trader keeps the premium received from selling the call options. If the price declines, the trader can exercise the put options to cover their losses.
These strategies are considered safe because they provide a level of protection against adverse market movements while still allowing for potential gains if the market performs as expected.