A covered call is a short call position taken against stock you already own. The calls we recommend writing have a low probability of expiring in-the-money, which means there is a high probability you will keep the premium you receive for writing the call. The risk is that your stock could be called away if the option is in-the-money near expiration.
A short put is a position that gives you the obligation to purchase the stock at the strike price of the put. This is an alternative to placing a limit order to purchase stock, but you collect a premium for doing so. If the stock is above the strike price at expiration, you keep the entire premium. Typically, you must have enough cash to cover the cost of owning the stock at the strike price for your broker to allow this trade.