Collar strategies hedge concentrated tech risk
The discussion highlighted using options collars to manage risk in concentrated, highly appreciated technology positions during a bubble.
The argument
Because out-of-the-money call options are highly bid due to high call skew while puts are flatter, investors can sell upside calls to fund the purchase of downside puts. This allows investors to maintain equity exposure while protecting against a severe drawdown.
The thesis, stress-tested
✓ What validates it
- ✓Implied volatility skew shifts, making calls less expensive relative to puts
▸ Risks discussed
- ▸The stock surges past the short call strike, capping upside gains
- ▸Transaction costs and bid-ask spreads erode option strategy returns
Hear it yourself
"If it's more than that, the rest of the S and P is gonna come down. And already, it's more than double what's even available to corporations unless GDP explodes higher. But but so you're saying the bubble is not so much in the price. It's in the earnings. That is it's just important things is price has to, go parabolic. Some are. Some are going pretty damn parabolic. You can't you can't look at the last few weeks or last few months and say there aren't some parabolic pricing. So that's happening. Valuation is not bubbly, Meaning, the traditional measures of valuation, PE, are not extreme."
10:30
AFFILIATE LINK · ZORTIX MAY EARN A COMMISSION · NEVER A RECOMMENDATION TO TRADE