---
description: "A hedging strategy combining short stock with a long call at strike K >= S0, limiting upside loss on a short position while preserving downside profit."
tags: [options, hedging, protective, bearish]
---

# Protective Call

**Section**: 2.5 | **Asset Class**: Options | **Type**: Hedging

## Overview
The protective call (a.k.a. "married call" or "synthetic put") amounts to shorting stock and buying an ATM or OTM call option with strike K >= S0. The trader's outlook is bearish. The call option hedges the risk of the stock price rising, acting as insurance on the short stock position.

## Construction
- Short 1 share of stock at price S0
- Buy 1 call option at strike K (K >= S0), paying net debit D

Net position: short stock + long call

## Payoff Profile
f_T = S0 - S_T + (S_T - K)+ - D = S0 - K + (K - S_T)+ - D

- Breakeven: S* = S0 - D
- Max profit: P_max = S0 - D  (if stock goes to zero)
- Max loss: L_max = K - S0 + D  (capped by the long call at strike K)

## Key Conditions / Signals
- Bearish on the underlying but seeking upside protection on the short
- Elevated uncertainty or event risk where a sharp rise in the stock is possible
- Useful when the trader wants to retain short stock exposure but limit loss from a rally

## Notes
The protective call is symmetrical to the protective put strategy. Academic literature on protective calls appears scarce. The debit paid for the call reduces the effective profit from stock depreciation.