Which of the following is a potential strategy when trading options?

The strategy of writing covered calls and buying puts for protection is a well-established approach in options trading. This method allows an investor to generate income from their stock holdings while simultaneously protecting against potential losses.

When an investor writes covered calls, they sell call options on stocks they already own. This can generate premium income, which helps to offset any potential downturn in the stock's price. If the stock price does not exceed the strike price of the call option, they keep the premium and can continue to hold the stock.

Simultaneously buying puts adds a layer of protection. A put option allows the investor to sell their stock at a predetermined price, thereby limiting potential losses if the stock price declines significantly. This combination of strategies can provide a balanced approach, where bullish positioning is complemented by a safety net.

Other potential strategies mentioned, such as investing solely based on historical prices without analysis, do not take into account the dynamic nature of the markets or risk management, making them less effective. Relying exclusively on market news might lead to reactive trading rather than strategic planning, which can increase risk without solidified strategies in place. Using only long positions on stocks ignores the benefits that options can provide in terms of hedging and income generation. Therefore, the combination of