Large Cash Position and Small Option Position

Discussion in 'Options' started by jmm07e, Apr 16, 2020.

  1. jmm07e

    jmm07e

    When I was in school I had this professor who managed money.

    He talked about one of his clients holding a large Cash Position and buying call options on SPY. They had a math formula for the amount of options to buy to effectively carry a large Cash Position and gain exposure using options as if he were entirely invested in SPY.

    Does anyone know about this strategy? If so, could someone provide me with the calculation?
     
  2. xandman

    xandman

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    jmm07e likes this.
  3. jmm07e

    jmm07e

    Much appreciated. An explanation would be very helpful to jog memory.

    I know it's a "God, I got to teach this guy everything" moment.
     
  4. jmm07e

    jmm07e

  5. xandman

    xandman

    Sounds like you know enough.

    Just do Collars. The temptation is too great when using a naked option position. Sell a call, buy a underlying and put to lock into a return range.

    That allows C-suite executives to sleep at night with their concentrated positions.
     
    Last edited: Apr 16, 2020