Using Options To Protect a Large Portfolio

Discussion in 'Options' started by LaxFan, Dec 25, 2019.

  1. spindr0

    spindr0

    It's a Captain Obvious statement to say that calls will be priced higher because owning the stock has a larger carry cost.

    What's lacking from your superficial analysis is the dividend which depresses call premium and increases put premium.
     
    #41     Dec 26, 2019
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  2. LaxFan

    LaxFan

    Let’s say 5% for the sake of discussion.
     
    #42     Dec 26, 2019
  3. taowave

    taowave

    On the whole 400k??

    And what sort of return would you hope for,I.e. risk 5 percent to make x???

    If the market is unchanged in a year coukd you handle being down 2 percent??







     
    #43     Dec 26, 2019
  4. ET180

    ET180

    I pointed it out to correct a false statement made by someone else here. For the major indexes, carrying costs are still more significant than the dividend. Even at today's historically low interest rates. On stocks that pay a relatively high dividend, calls still trade at a premium to puts going a year out unless it's deep ITM for the calls in which case the dividend starts to become fully priced in.
     
    Last edited: Dec 26, 2019
    #44     Dec 26, 2019
  5. lindq

    lindq

    You would do well to ignore any posts suggesting that you start selling puts on your nest egg.

    Very bad advice, given when looking in the rear view mirror at a 10 year bull market.
     
    #45     Dec 26, 2019
  6. ET180

    ET180

    But what's the alternative? Buying stocks? The fact is that selling one ATM put is always safer than buying 100 shares of the underlying. The trade off is unlimited upside for higher probability of profit.

    However, I don't like the idea of selling puts on SPY 1 year out while markets are at ATHs and the VIX is at 12. The time to sell options 1 year out is when the VIX is trading much higher than 12.
     
    #46     Dec 26, 2019
  7. LaxFan

    LaxFan

    I'm not selling puts on my whole nest egg. Many of the ideas here are very interesting, but also very complex for an options newbie. I do some low-risk cash secured puts, here and there, but likely will just dollar-cost average into some things while doing the occasional CSP and/or covered calls.
     
    #47     Dec 26, 2019
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  8. LaxFan

    LaxFan

    -On the whole 400K, yes.
    -Not sure of a target return.
    -I could handle being down 2 percent if the market is unchanged.
     
    #48     Dec 26, 2019
  9. ET180

    ET180

    \

    Why does your risk-tolerance depend on what the market does?
     
    #49     Dec 26, 2019
  10. LaxFan

    LaxFan

    I don't know...I was just answering taowave's question.
     
    #50     Dec 26, 2019