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Use the original records
Covered case: stock cost 100, short 110 call premium received 4. Protective case: stock cost 100, long 90 put premium paid 3. Both use one underlying unit, one expiry, no stock income and unfinanced simple profit.
Compare terminal functions and costs
| Feature | Covered case | Protective case |
|---|---|---|
| Terminal value | min(S,110) | max(S,90) |
| Net initial cost | 96 | 103 |
| Simple lower outcome | −96 at S=0 | −13 below S=90 |
| Simple upper behavior | Capped at 14 | Grows with S above strike |
Keep the comparison educational
The two functions alter different regions and have different premium cash flows. One is not a universal substitute for the other. Actual objectives, contract terms, income, costs and risk constraints would be needed for a decision.
Avoid a generic insurance or income promise
The floor and cap are terminal algebra under these specific legs. They do not remove every interim price, assignment or liquidity concern. Report the modeled outcome instead of an unqualified low-risk label.