Large Cash Position and Small Option Position

J

jmm07e

When I was in school I had this professor who managed money.

He talked about one of his clients holding a large Cash Position and buying call options on SPY. They had a math formula for the amount of options to buy to effectively carry a large Cash Position and gain exposure using options as if he were entirely invested in SPY.

Does anyone know about this strategy? If so, could someone provide me with the calculation?
 
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Much appreciated. An explanation would be very helpful to jog memory.

I know it's a "God, I got to teach this guy everything" moment.
 
Sounds like you know enough.

Just do Collars. The temptation is too great when using a naked option position. Sell a call, buy a underlying and put to lock into a return range.

That allows C-suite executives to sleep at night with their concentrated positions.
 
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