Best way to protect any downward movement from wipeout is to do a bull put spread (selling a put and buying a further OTM put. This move even lowers margin requirements compared to other similar spreads. Even if the market gaps downward to zero, you are covered for a max loss (spread between the long and short put minus the premium received). Bull call spreads (debit spread) protects downside as well as bull put spread. I used to do covered calls 10 years ago when the market only moved upward. Made lots of money. Now, it might be wise to purchase an OTM put to go along with your covered call. I am not a fan of shorts for the gap down scenario is the same here.
One other thing about covered calls. If the market makes a huge move in the upward direction, you may consider exiting the cc, and taking your profit--remember the market could reverse. For example, two Martin Luthur King holidays ago, I placed 4 covered puts on the Friday before. I received about 12,000 in premium. The market dropped 60 points over the holiday. I exited the combo first thing Tuesday for a 6,000 profit. Then later, the FED stepped in and the market rebounded almost back to Friday's close. Can't be a pig. My point: every option strategy needs to be monitored.
One other thing about covered calls. If the market makes a huge move in the upward direction, you may consider exiting the cc, and taking your profit--remember the market could reverse. For example, two Martin Luthur King holidays ago, I placed 4 covered puts on the Friday before. I received about 12,000 in premium. The market dropped 60 points over the holiday. I exited the combo first thing Tuesday for a 6,000 profit. Then later, the FED stepped in and the market rebounded almost back to Friday's close. Can't be a pig. My point: every option strategy needs to be monitored.