Using Options To Protect a Large Portfolio

L

LaxFan

Is there any recommended strategy to use options to protect a large portfolio? I’ve read about LEAPs but heard they are expensive.

In my case, I’ve been way too conservative and have missed the greatest bull market in history at age 43. Nearly all assets in cash. Even though I follow the markets and find stocks and investing very interesting I don’t have the personal risk tolerance to sleep at night with large paper losses. Sitting on about $400K, but fear putting it into an index fund at record highs. Feel like a fool for missing out on the past decade, but I can’t just dump it all into the SPY now.

Any way to use options to protect the portfolio, yet invest? Or should I just start dollar cost averaging a couple hundred a month and forget what I missed?
 
LaxFan said:
It’s more than I ever thought I’d accumulate.
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So keep working and DCA. In another 10 years, you'll have around 2 mill. Keep it up.

Daal said:
Read about Dalio's All Seasons portfolio, its a way to earn some equity premium while minimizing drawdowns
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Also a good idea, but you'll get FOMO on bull runs.
 
nooby_mcnoob said:
So keep working and DCA. In another 10 years, you'll have around 2 mill. Keep it up.



Also a good idea, but you'll get FOMO on bull runs.
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Is 2 million even remotely feasible? I’d like to believe it but can’t imagine that with my conservative mindset.
 
LaxFan said:
Is 2 million even remotely feasible? I’d like to believe it but can’t imagine that with my conservative mindset.
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DCA plus another ten twenty years of earning I'm sure you can. Just don't quit the day job and work on improving your income
 
Rather than using options to protect $400K, just purchase DITM calls or call spreads in SPY.
Put the remaining 75% in the bank @ 2% (1 yr. CDs) or some other investment.
Buying smaller amounts of call spreads in TLT (bonds) or GLD (gold) could also act as some protection for a lower SPY.
 
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LaxFan said:
Any way to use options to protect the portfolio, yet invest? Or should I just start dollar cost averaging a couple hundred a month and forget what I missed?
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You want portfolio insurance? That's what options *are*.
But if your account is in cash, then you are already insured against anything but inflation.

Regardless, you express a wish to "participate" -- that is an easy one. While I agree with the dollar-cost averaging observations made thus far (with a default SPY target), I'd offer something with a little more (a *lot* more) involvement (entanglement): figure out those things that you'd wish to own, and sell naked puts on them: for $1000 of capital employed, you'll earn a great return. If you get hit on something you would've bought anyway, then you'll have been *paid* to purchase it at a lesser price than market.

Beats the pants of off dollar-cost averaging.
 
tommcginnis said:
You want portfolio insurance? That's what options *are*.
But if your account is in cash, then you are already insured against anything but inflation.

Regardless, you express a wish to "participate" -- that is an easy one. While I agree with the dollar-cost averaging observations made thus far (with a default SPY target), I'd offer something with a little more (a *lot* more) involvement (entanglement): figure out those things that you'd wish to own, and sell naked puts on them: for $1000 of capital employed, you'll earn a great return. If you get hit on something you would've bought anyway, then you'll have been *paid* to purchase it at a lesser price than market.

Beats the pants of off dollar-cost averaging.
More...

+1 to this. It's how I take positions.
 
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