At Vision Capital we utilize derivative securities to manage risk, cash and tax situations for our clients. We may implement one or more of these strategies when it is appropriate.
We use covered call strategies to enhance return on concentrated positions. This type of strategy is appropriate when a client holds a large position of a security with a significant taxable gain. We will write a series of calls against the position to generate income and potentially reduce the position over time.
Cash secured put strategies may be appropriate if a client holds a large cash position and market conditions are not optimal for immediate investment in equity securities. In this case, we may suggest holding the cash position and writing puts to collect income. If markets fall, the cash will be invested at a lower price level.
We may suggest a hedge overlay when a client needs to reduce portfolio volatility without selling securities for tax reasons. We buy enough equity index puts to synthetically reduce portfolio downside.