Getting Back into Stocks

J

johnson232

I went to cash about a year ago and have move all of my portfolio out of mutual funds. I am considering getting back in by either buying calls or buying stocks using collar trades to hedge my position.
This would allow me to make a large bet with limited risk.
On the other hand I've waited this long and can wait a little longer.
 
Yes using the call premium to buy puts will work to limit risk on stock.

You need to determine the amount of deductible you are willing to pay out of pocket and/or the amount of upside you are willing to potentially give up.

Stick to buying the SPY ETF dont go for individual stock, and the options for SPY are pretty liquid.
 
I went to cash about a year ago and have move all of my portfolio out of mutual funds. I am considering getting back in by either buying calls or buying stocks using collar trades to hedge my position.
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Collars are equivalent to vertcial spreads. Unless you're legging in and out or trading the components, do the vertical and save some commissions and the stock's spread.
 
thanks guys
I'm 66 and like to hold stocks that pay dividends. The way I have been taught to use the collar is to remove the put (in a normal market) except when needed ie earnings. Also to use a protective call when the short goes in the money, if you can't roll the short call for a credit.
 
I'm 66 and like to hold stocks that pay dividends. The way I have been taught to use the collar is to remove the put (in a normal market) except when needed ie earnings.
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Whatever your age is, the dividend is priced into the options so there's no free lunch either way you do it (g).

Removing the put implies that you're writing covered calls when not near earnings so the same suggestion applies... do the equivalent naked put instead of the covered call and add the put leg for earnings protection and you'll still save commissions and slippage on a leg.

Also to use a protective call when the short goes in the money, if you can't roll the short call for a credit.
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I don't think you're referring to collaring short stock so I'm not sure what that means. If you're referring to a CC going ITM, take your gain via assignment. You've made the max and find another good trade.
 
I think he's suggesting the purchase of a call so the underlying doesn't "get away." If there's that much surge in this strong dividend payer, I would think spin is right: other opportunities (gov't bonds?) will look more attractive than paying the call premium.
 
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