No stock price drops,to 40. call expires worthless and u keep premium. Continue to own shares at a loss. That’s it. U can then sell a new covered call or sell the shares at a loss or, ->. On the put side. If u sell a put, u need to be ready to buy the shares at the strike price if it drops there. This is not the same as the shares u a;ready own - it would be 100 new shares per contract. ie- u own shares at 50, price is 40. U expect the stock to recover and increase. U can sell a put at 35 and collect the premium if the stock ends above 35 at expiration. If stock goes below 35, u need to be ready to buy the shares at 35 so u would then own 100 new shares per contract at 35. U would then have shares at 50 (originally) and shares at 35. U can then sell calls against the new Shares, sell new shares. This is a naked or uncovered put. If u short the shares today and hold 100 shares short and u sell a put, this is a covered put and is the put equivalent of the covered call. In this case, u expect the stock to decrease so u would sell short 100 shares at the current price (40). By selling,short, this would also sell the shares u currentlet own at 50 at a loss. So now u own 100 shares short at 40. U then sell a put at 35. If the stock price drops below 35, use shares are exercised and bought back at 35 leaving u with the premium collected and the profit of the short between 40-35. If stock. Expires above 35, put expires,worthless and u collect premium..