Hello friends,
My AMD has run up a lot and i would like to hedge similar to "zero-cost collar" McMillan strategy, but with some variations.
My main goal is to protect my profits while allowing a stock to rise.
I prefer not to sell stocks so I delay taxes. I am also not looking to sell options for income.
I am bulling for AMD for the long run, but want to protect profits against pullbacks.
Here are some strategies I am considering:
- AMD Jun 18th 330/410 Collar (zero cost) – I allow for pullback to 330 but 410 upside cap feels too low. the close expiration does not allow to set Call strike higher, if I am looking for zero cost
https://optionstrat.com/5vr8dbP4DYzT
- AMD Dec 18th 330/440 Collar – later expiration allows 440 Call (zero cost)
https://optionstrat.com/csRLXEfpfo1Q
- AMD Dec 18th long 330Put short 550Call short 260Put (zero cost) – same as previous collar, but I sell 260 Put to move the Call higher to 550. (the image is of this strategy)
https://optionstrat.com/8uhTo7UxKUSH
I would like to hear your thoughts and also:
1. How do I manage this position (say, second 330/440 collar ) if AMD:
1.1 drops to 280?
1.2 runs to 480?
How would I roll the options if i prefer not to sell?
2. How do I compare each strategy – is there a composite metric I can use? like %upside cap vs risk?
3. The earnings are in two days I understand there will be IV crash right after… so how can I adjust?
Any other thoughts?
Thanks a lot!
Comparing and Managing AMD Collar Hedging Strategies
byu/mshparber inoptions
Posted by mshparber
2 Comments
On my nee stock, if I’m late. I would just sell a collar with the same strikes, and everything will be equal. If the stock goes up on earnings I don’t make money, if the stock goes down i don’t lose money.
When i think the stock is reversing back up I pull it off. Just when i think it need no more hedge I just pull it off.
This is a sleep better at night strategy, and I don’t have to care about rolling, and managing it .
Can’t understand why you’d want to hole yourself into a trap if in your own words you’re already looking for ways to roll the collar if it hits your strikes on either direction, meaning you do not respect the bargain you get yourself into.
If these are shares, and we’re talking about AMD so not a meme stock, and in your own words you’re not looking to sell in the foreseeable future, why would you care what earnings do to the stock in the short run?
I can understand collaring a long call you’ve held for a while that appreciated a lot with a ZCC, but most collars are terminal structures when you’ve reached a level of profit you are now comfortable walking away with and closing the position.
My 2c is if you’re set on a ZCC, it’s not meant to be managed. You either accept the assignment on either end, or in the bear case you close the ZCC for a fat profit and use it to buy more shares. Either way, you’re not going to manage it well on a high IV ticker.