Concentrated Stock Comprehensive Guide eBook Offer | Page 14

3. Hedge & Retain:

Collateralize Income Enhancement

Use a portfolio’s collateral value to generate potential income.

May be appropriate for risk-tolerant clients with a goal of generating income on static holdings.

Potential Benefits

Enhance returns of virtually any portfolio.

Generate income cash flow with less sensitivity to the level of current interest rates.

Low correlation to equity and fixed- income markets.

Risks and Considerations

If market conditions turn negative unexpectedly, we may buy back the put option contracts at a loss.

Leverage is employed on the collateral value of the portfolio, but margin is not used unless the put contract is assigned and cash is not available.

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