Protective Puts & Collars
Using options to limit downside on stock already owned.
What is Protective Puts & Collars?
A protective put - buying a put on stock you own - sets a floor at the strike price, for the cost of the premium. A collar adds the sale of a call against the stock, using its premium to pay for the put, so the downside floor is financed by capping the upside. Both are volatility-management techniques.
Protective Puts & Collars: a worked example
Own at $100: buy a $90 put and sell a $115 call. The position is locked between $90 and $115.
More terms in Clients, Strategy & Tax
Sole Proprietorship
A business owned by one person with no legal separation from the owner.
General Partnership
Co-owners share management and unlimited liability; income passes through.
Limited Liability Company (LLC)
Limited liability for owners with pass-through taxation by default.
C Corporation
A separate taxpayer - profits taxed at the corporate level, then again as dividends.
S Corporation
A corporation that passes income through to shareholders, avoiding double tax.
Trust & Estate Accounts
Accounts run by a fiduciary - a trustee or an executor - under a governing document.
Foundations & Charities
Tax-exempt organizations investing for a mission, often in perpetuity.
Client Profile & Data Gathering
The financial and nonfinancial facts every recommendation must rest on.