The Challenge: Protecting Wealth Without Triggering Taxes

For many of our clients, a large portion of their wealth is tied up in a single, US or Australian stock. While this concentration has been a source of growth, it also introduces "single-stock risk"—the danger that a sudden market shift could erode years of gains. The challenge is often how to protect that value without selling the shares and triggering a massive, immediate capital gains tax event.

The Solution: The "Collar" Strategy

Working with SpiderRock, we deployed a "Collar" as an overlay on the client’s existing holdings. This strategy involves two simultaneous moves:

1. The Floor (Protective Put): The strategy calls for the purchase of an out-of-the-money put option, which act as an insurance policy. If the stock price drops below a certain level, the put provides a "floor," capping the potential loss.
2. The Funding (Covered Call): To pay for that insurance, an out-of-the-money call option is sold on the concentrated stock position. The premium received from selling these calls offsets the cost of the put, often resulting in a "zero-cost" or "low-cost" hedge.

Why SpiderRock?

We chose to partner with SpiderRock because of their institutional execution and "no call-away" technology. Unlike a standard retail option strategy, SpiderRock’s platform actively monitors the positions in real-time. If the stock price rallies toward the cap, they can proactively "roll" the options to prevent a forced sale of the underlying shares. This ensures the client retains their long-term ownership while enjoying a defined, "collared" range of outcomes.

The Result: Tactical Peace of Mind

For this client, the implementation has provided a level of clarity that traditional diversification couldn't offer in the short term. They now have a mathematically defined "worst-case scenario" for their concentrated position, allowing them to remain invested for the long term with the confidence that their lifestyle and legacy are protected from volatility.

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