The primary risk mitigation strategy is wise diversification.
The covered calls approach you mentioned can be a great way to enhance the yield on some positions, or even a portion of a portfolio that is dedicated to that approach. Of course there's no downside protection using that method alone, but that's certainly fine. For those with a concentrated position in some particular equity, there can be a variety of ways to mitigate the risk exposure using options, such as using the OTM call proceeds to buy OTM puts. The motivation behind this is often one that you might consider when owning a home. It's a large asset. You want to protect it, so to help you out in case there's a fire, you do what? Buy insurance. What's the different in that and if you own a large position in a particular stock? Want to avoid the risk of a collapse in the value of that holding? There's a way to do that.
Right on.
Never understood why some people don’t buy protection.
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