Client Situation
Cash & New Positions
Whether your client is deploying idle cash or buying a stock or ETF for the first time, the question is the same: how much market exposure do they want, and what tradeoff between downside, upside, and income fits them?
Cash avoids market losses but gives up market upside. Buying shares normally gives your client full upside and full downside. Parity lets you compare the choices in between.
Less protected
Most protected
Buy Unprotected
Full market exposure
Downside
Full market loss
Upside
Uncapped
Return source
Market participation
Covered Call
Generate income from the shares
Downside
Full downside remains
Upside
Capped
Return source
Option premium + dividends
Buffer
Absorb the first part of a decline
Downside
First losses absorbed
Upside
Capped
Return source
Market participation
Protective Put
Define a maximum loss, keep upside
Downside
Defined maximum loss
Upside
Uncapped
Return source
Market participation
Collar
Put a defined limit on downside
Downside
Defined maximum loss
Upside
Capped
Return source
Market participation
Stay in Cash
No market exposure
Market downside
None
Market upside
None
Return source
Cash yield
What could 100 shares of SPY look like?
Illustrative 1-year comparison using one 100-share position.
| Approach | Downside | Upside |
|---|---|---|
| Unprotected SPY | Full market downside | Uncapped |
| Covered Call | Income cushions the first part of a decline | Income + capped upside |
| Buffer | First ~10% of losses absorbed | Capped near +15% |
| Protective Put | Defined maximum loss | Uncapped |
| Collar | Maximum loss around 5% | Capped near +12% |
| Cash | No market loss | Cash yield only |
Illustrative only. Actual outcomes depend on live option pricing, the chosen expiration, and holding the position through the outcome period.
Start with the investment. Then choose the tradeoff.
Pick a stock or ETF
Choose what your client wants to own. Option strategies are typically built in 100-share increments.
Compare outcomes
See the downside, upside, income, and cost of each structure.
Build the trade
Take the selected trade to your client's brokerage.
Important tradeoffs
- Buffers and collars exchange some upside for downside protection.
- Covered calls generate income but do not provide hard downside protection.
- Option prices and dividends affect the final outcome.
- Cash returns depend on the yield available at your client's bank or brokerage.
- Listed equity option strategies are typically modeled in 100-share increments.
Model a new stock or ETF position
Choose an investment to see how a standardized 100-share position could be structured with different downside and upside boundaries.