Selling cash-secured puts on asset managers
Selling long-dated, out-of-the-money cash-secured puts on high-quality asset managers allows value investors to manufacture attractive entry points with a built-in margin of safety.
The argument
The guest explained that elevated market volatility has inflated option premiums, allowing investors to sell puts on companies like Blackstone, KKR, and Ares far below their current stock prices. This strategy generates double-digit yields and establishes a disciplined, lower-risk entry point for stocks the investor is fundamentally bullish on anyway.
The thesis, stress-tested
✓ What validates it
- ✓Option premiums expiring worthless, allowing the investor to keep the full premium
- ✓Acquiring the shares at the targeted discount price during a temporary sell-off
▸ Risks discussed
- ▸Being forced to buy the underlying stock during a severe market downturn
- ▸Underperforming a rapidly rising market if the options expire unexercised
Hear it yourself
"Like, we've we've sold some cash secured puts on, on KKR, on Blackstone, on Ares, because you're getting you're able with the volatility as high as it is, you're getting to get some you're getting to manufacture some pretty low valuations for high quality managers."
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