In Jan this year (2024), I basically bought LEAPs on Google, Meta, Apple, Amazon, and Microsoft expiring in Jan 2026. All were roughly around 0.7 – 0.8 delta. As you can imagine, these stocks have all roared this year and are up quite a lot.

    I'm not expecting some kind of black swan event, but a market correction in the near future wouldn't be crazy. I just want to have some insurance to make sure all the profit I made isn't somehow totally wiped out due to greed on my part.

    Anyways the question was in the title, but – seeking suggestions on how to hedge these PMCCs/LEAPs? I'm sure there's multiple levels of hedging that can be done, but just wanted to hear what ya'll would consider doing here.

    Things that I've thought of:

    1. Far OTM put options on QQQ as some kind of proxy for the magnificent 7 (even though it's not exactly)
    2. Far OTM puts on each individual stock mentioned above
    3. Collar Strategy: In addition to my long call position, simultaneously sell out-of-the-money (OTM) call options (PMCC essentially) and use the proceeds to purchase OTM put options. This limits upside and downside risk because instead of using the premiums collected to buy new long calls or roll long calls, we are buying long puts.
    4. Selling high delta (0.25-0.3) ITM calls as part of the PMCC to collect fatter premiums if stock goes down (not convinced this makes a huge dent since PMCC is still weighted heavily on the long call side, but since these strategies are largely bullish ones, hedging too much wouldn't make sense)

    Things I don't want to do:

    1. Sell any of the leaps – I want to hold for at least one year to save on long term cap gains. Obviously selling before one year to minimize loss can be done, but I'd rather stick to principle and hold for a year always.

    That's pretty much it – I'm open ears to anything else really.

    For the sake of the question – let's assume I have an equal $ amount allocated to each of the options. And I have cash I can use to purchase other things as needed.

    Suggestions for hedging PMCCs/LEAPs on the Magnificent 7? (+100% YTD, Seeking Insurance Strats)
    byu/Temporary_Bliss inoptions



    Posted by Temporary_Bliss

    1 Comment

    1. Illustrious_Way_5974 on

      i would make it a zero cost collar or sell 2:1 calls against the leaps in a shorter expiry making it somewhat of a diagonal call spread/ratio spread

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