VIDEO: Stock Replacement Strategy Part 1 – Mechanics
The stock replacement strategy involves buying in the money options to simulate a position in the underlying without actually holding the underlying. For example, buying SVXY call options to simulate a short volatility position without actually holding the SVXY. Or buying put options on the VXX, again to simulate a short volatility position without having to borrow short shares from the broker.
Stock replacement is a great risk mitigation strategy, but it may also be helpful for any investors out there that have been restricted from owning their favorite ETFs. Europeans in particular may benefit here with the recent MiFID II regulations that heavily restrict US based ETFs. The stock replacement options strategy may be a potential solution so please ask me any questions you have.
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