as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
system
what are some ways to mitigate the risks of covered calls?
user
if the position starts losing money as soon as it is put on, then i would close it out ,taking a small loss. however, if it starts making money,as in the stock inches higher, then you can use part of the premium collected to buy an out of money put, thereby limiting your downside. it is called a collar.
assistant