Back
Use Case
Define Your Outcome
Start with the protection, income, and upside tradeoffs you want.
Instead of choosing option contracts yourself, start with the outcome you want for 100 shares. Parity translates that into the option structure that creates the tradeoff.
Start with the outcome - not the options.
Protection
More protection
More market exposure
Defined max lossFirst-loss bufferIncome cushionUnprotected
Upside
Lower cap
More upside
CappedSome roomHigher capUncapped
Income
Lower income
More income
NoneDividendsOption premiumPremium + dividends
Time
30 days3 months6 months1 year
Your outcome
Protection + Income + Upside + Time
Parity
Option structure
The puts and calls that create it
Parity translates the tradeoff into the puts and calls needed to create it.
Different structures create different kinds of protection.
Collar
Defined maximum loss
Capped upside
Buffer
First losses absorbed
Capped upside
Covered Call
Income-based downside cushion
Capped upside
Unprotected
No option protection
Uncapped upside