Thanks Mark for your simple and straight forward explanation about covered calls. Having lost in the market through the buy and hold strategy, I now believe the best way to protect your capital and gain in the market over time is through covered calls.

Covered call writing is an excellent strategy.  Especially for those who are first learning about options.
But, it is not the 'best' strategy for most investors.  (I don't believe there is a single 'best' strategy.  Each investor has different needs and different methods simply 'feel' more comfortable to  different investors.)

My only concern is this: if you write a covered call, you still have downside risk to contend with, in case the stock (as is often the reality of the market, declines
rapidly).  In your option, what is the best way to protect yourself? Could it be doing a collar trade or just put a physical stop loss at or just below  break-even after taking into account the option premium?

You are correct.  The 'flaw' in covered call writing is that the downside has only minimal protection.  It's better than no protection, but for more coservative investors, it may not be enough protection.

The collar is my choice for such investors.  Converting the covered call to a collar by purchasing an out of the money put option provides the insurance you want.  Most of the time the put is going to expire worthless - but when it's needed it can make a big difference.  If your goal is to accumulate wealth over time and not to make a killing in the market this week, collars will work for you.  (I don't like using stop loss orders when you have stock and option positions that are tiedd to each other - but that's my choice.  It doesn't have to be yours.)

But, to own a collared position, there is no need to buy stock, sell calls, and buy puts.  You can adopt positions that are equivalent.  That means same risk, same reward, but easier to trade.  Two positions are equivalent to the collar:  sell a put spread or buy a call spread.  You must use options wth the same expiration date as you would use for the collar.  You must also use the same strike prices.  Thus, if you plan to buy stock, sell May 65 calls and buy May 60 puts, the equivalent position is: 

a) Buy May 60 calls, sell May 65 calls or
b) Sell May 65 puts, buy May 60 puts.

My pleasure.

--
Mark D. Wolfinger
The Rookie's Guide to Options:
The Beginner's Handbook of Trading Equity Options