Half and Half with Blackstone Shares

This strategy calls for an investment equal to half as much of the capital you would otherwise like to allocate to a stock, and selling an equivalent number of puts to potentially buy the stock at a lower price if the share price continues to fall. 

In the article BlackRock is cited as one of the best ways “to monetize the rise of passive investing, risk management, and the use of sophisticated technology to optimize investment decisions.”

To apply the strategy to this stock, rather than buy 1,000 shares you would purchase 500 and sell five downside puts. “With the stock at $433.34, an investor could sell five BlackRock July $410 puts for about $42 per contract.”

The investor keeps the premium ($42) for so long as the share price is above the strike price at expiration. In the event that the share price drops below the strike price at expiration and the investor buys the stock “…the effective purchase price of the stock would be $336 (strike price less premium received, which provides a modicum of safety.”

Source: Steven M. Sears | “Picking Up Stocks on the Cheap Amid the Turmoil” | Barron's | 3/26/2020 | Visit

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