Options 101: Collars Revisited. Inspired by a listener question, we review the collar strategy
Question from Talos - I enjoyed your panel presentation on The Holy Grail of the financial markets with Randy Swan and Mike Cavanaugh. I realize this panel was from a few years ago. Have there been any updates with regards to data on collars? Are they still effective tools for advisors looking to mitigate portfolio risk? On a specific note are they applicable to concentrated equity positions? I would appreciate any information you could provide.
If you want to hear the episode that inspired this question, you can find it at: The Holy Grail of the Options Market
Its time for an update on collars!
- What are collars?
- What makes them so effective for financial advisors?
- Why are they the "Holy Grail"?
- Types include:
- Collars with a kicker
- Zero cost collars
The Buzz: New Wilshire Analytics study finds options indexes offered noteworthy returns over 30 years.
Office Hours: Listener questions and comments
- Question from Nick Tanner, CFA - The most recent Janus report on metals discusses their outlook for these "volatile products." What is your opinion of the recent volatility in these products? Does that make them less suitable for options-oriented clients or more suitable? Are there particular products you recommend for different clients? Read report here.
- Question from Javier Mendoza - We are in a relatively low volatility environment right now which is contrary to the seasonality of volatility which points to Sep and Oct as the most volatile months. Do you think we're headed for a return of volatility this month or next month? Is it worth adding a few VIX calls to my holdings?
- Question from LVX65 - Great breakdown of the problems with 60/40 this episode. I'm curious what part you feel options should play in a traditional portfolio. Should there be an options allocation? What about volatility. Do you agree that volatility is its own asset class and should have an allocation in every portfolio?
