Specifically, the protective call option strategy includes the following steps:
Holding basic assets: investors hold a basic asset (such as stocks).
Buy call options: investors buy a corresponding number of call option contracts, and the exercise price of these option contracts is usually set at a level slightly higher than the current price of the underlying assets.
Portfolio protection: Buy bullish option contracts to provide portfolio protection. If the underlying asset price rises, the call option will generate income when the option expires, partially or completely offsetting the losses caused by the underlying asset price rise.
The key goal of protective call option strategy is to reduce the risk of portfolio through the protection of call option. Although there will be a certain cost (option fee) in purchasing call options, the income of call options can offset or partially offset the loss of portfolio when the price of underlying assets rises.