CNBC: How do you use covered call options, index options and option overlay strategies for clients?
Carson: Options should be used in a very transparent and straightforward fashion. First of all, we will use put options to limit downside exposure in our "Irreplaceable Capital" strategies. We emphasize that for many clients, protecting your downside is their No. 1 priority.
Asset allocation simply didn't work in 2008–09, and we shouldn't expect it to work again when the next financial crisis occurs. We believe that in this "new era" of investing, options are a viable option to reduce volatility.
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We also have a covered call strategy that we call "Write Income." With interest rates at record lows and traditional fixed-income investments seeming more risky than ever before, we have been forced to become creative when it comes to generating yield for our income-hungry clients.
In response, we came up with Write Income, a strategy that buys high dividend–paying stocks and sells covered call options on our holdings. We have been very pleased with the results and expect it to remain a viable alternative to overstretched and low-yielding traditional fixed-income options.