Collar involves buying shares, selling a covered call and buying put.
If price stays flat no loss, if price moves moderate to aggressively will profit till CC strike, if price dumps put and CC negate losses on the shares.
Curious if anyone prefers to use collars, what size account would benefit most from a strategy like this am assuming big accounts, and any feedback or thoughts from those who've ran collars?
(The more think about options, the less think about structures now and more about price action and its potential move within a predicted amount of time. This is not easy, so going long on good companies as stocks naturally rise is potentially easiest/safest way to use the leverage options provide at the cost of timing the intended move. I have earning's down now but outside of earning's, playing the short term, I haven't found anything which safe enough to consider yet aside from this initial idea of using collar.)
Anyone Like Collars? (Shares + CC & Put)
byu/breakyourteethnow inoptions
Posted by breakyourteethnow
4 Comments
Wait, are you proposing using options contracts as some sort of insurance policy, hedging against meaningful price action swings in either direction to turn profit/mitigate risk?
Get out of here either that sort of craz-… Oh wait this isn’t WSB.
So yeah, all in all, sounds sensible to me if you wanted to insure your position and mitigate the risks of meaningful price action swings in either direction.
When NVDA was $97, VIX was at $60, the $97 strike was paying $1200 for a monthly! Or 10% of the cost basis for 100 shares in a month. I didn’t buy worried about dropping more, had considered a collar then, could’ve sold the $105 CC and bought $90 put, making more than enough profit to cover the put after assignment or negate loss if drops more. I like this strategy covers all angles.
Another way to look at this is it is synthetically equivalent to a put vertical.
Pros call them risk reversals