Carapace Financial Advisors

If you’re surprised that the stock market is currently at all-time highs and you’re wondering what to do next, you might consider selling call options referencing select stocks in your investment portfolio. 3 reasons to sell call options today are as follows: 1) Increase equity return potential.?With the S&P 500 up more than 155% from its Covid low, most equity analysts are predicting single-digit gains through year-end 2025.?Selling call options referencing “buy and hold” stocks allow for continued appreciation potential to an above-market price and outperformance equivalent to the call premiums received. 2) Supplement income.?The Federal Reserve is forecasting that the Fed Funds Rate will decline by 1.42% to 3.41% by the end of 2025.?Investors can enhance portfolio income by selling calls on existing equities in their portfolio and generate yields in excess of 3%. 3) Capitalize on elevated market volatility.?In advance of the upcoming November election, the S&P 500 volatility index is currently 19.0 compared to its 2024 average of 15.2.?Selling call options today allows investors to benefit from higher market volatility and generate higher options premiums.????

It was a fantastic first day at BNY Mellon | Pershing #realinsite engaging with advisors from around the country. If you're in Nashville, please stop by Booth #602 tomorrow to learn how Carapace Financial Advisors strategies can help your clients hedge existing concentrated stock positions or customize new equity investments with market risk protection.

Congratulations to Hope through Education on hosting a successful Spring Luncheon fundraiser last week. Carapace is extremely proud to be partnered with such an incredible organization promoting academically excellent, values-based education for disadvantaged youth. https://lnkd.in/eThb9q_b

In a recent article, the Financial Times notes that there have been $20 billion of net inflows into buffered ETFs since 2022. Carapace Financial cautions that some buffers are better than others. Buffered investments are particularly attractive for retirement-focused investors who want to stay invested in equities but limit losses in a downturn. While buffered ETFs, notes and annuities are becoming a staple in retirement portfolios, there are significant drawbacks to these forms of investment. Each is “one size fits all,” unmanaged (“set it and forget it”) and fees can be pricey. As an alternative, Carapace Financial offers its clients buffered strategies in separately managed accounts that are: 1) Customized to meet specific risk / return objectives 2) Managed 3) Cost-effective So, while buffered investments are a great tool to navigate uncertain equity markets, we advise clients to consider the best form of investment before implementing a strategy. https://lnkd.in/eF2RhQns

If you have a large cash position earning 5% while you wait for a stock market correction…... you are not alone. According to ICI, money market fund assets reached an all-time high of $6.1 trillion the week of 3/13/24. So, while sitting in cash may seem reasonable with the stock market at all-time highs, this strategy exposes investors to opportunity risk if the market continues to move higher. Buffered investments provide upside participation if markets continue to rise and “buffer” against losses if the market depreciates. Carapace Financial notes that buffered investments can also be customized around any liquid equity (e.g. value, growth, income-oriented) to meet a specific investment objective.

Top 5 reasons to hedge stock positions with the market at all-time highs. With the equity markets trading at all-time highs, investors with low tax-basis positions have three alternatives: Hold and worry about a decline in the market; Sell and trigger a significant tax liability; or Hedge the position. Carapace Financial often recommends hedging strategies to its clients for the following reasons: ? 1) Peace of Mind.?Hedging provides investors with defined downside risk protection and “sleep at night” capital preservation. ? 2) Maintain Upside Appreciation.?Hedging allows investors to participate in full stock price appreciation to an attractive capped level. ? 3) Keep Stock, Keep Dividend.?Hedging lets investors retain their dividends for income purposes. ? 4) Tax-Efficient Exit Strategy.?Depending on the investor’s tax-basis in the stock position, hedging strategies can be implemented without resulting in a capital gains tax liability. ? 5) No Out-of-Pocket Expenses.?Hedging strategies may be customized to produce a net upfront credit to the investor.

In a recent interview on CNBC, the CEO of Renaissance Macro Research said that regional bank stocks are currently showing “buyable weakness” after noting that credit spreads in that market are as tight as they ‘ve been since 2022. At the same time, Carapace Financial points out that options volatility referencing the regional bank index ETF (KRE) is currently almost 2x higher than the S&P 500 VIX. As high volatility benefits certain equity hedging strategies, Carapace Financial believes that this is an interesting time for KRE investors to consider deep Buffer or 100% Principal Protected hedging strategies. Source: https://lnkd.in/eeJScr5e

The CBOE chart shows October volatility futures are trading 15% higher than the price for September contracts.? A likely explanation for this gap, as noted in the Bloomberg News article, is the use of October VIX Futures contracts to hedge against potential risks related to the November presidential election. This higher volatility term structure presents a unique opportunity for Registered Investment Advisors (RIAs) to finance downside protection on low-tax basis concentrated equity positions with higher call premiums. Historically, term structures on zero-cost collars have been generally symmetrical, i.e., strike prices on out-of-the-money (OTM) calls and OTM puts are typically around the same distance from the at-the-money strike price of the underlying equity. With the higher prices of October VIX Futures, RIAs can capitalize on higher short call premiums, preserving greater upside appreciation potential in the stock, with similar downside protection. Sources: https://lnkd.in/ebpMJWj3 https://lnkd.in/eetMZ3aA

Congratulations to our equity portfolio advisor and partner on their well-deserved Q4 ranking!