Get Paid To Rebalance

Do your clients have runaway winners like NVDA that need pruning?

Advisor Mike Tosaw explains how Adaptive can help portfolios get paid to rebalance.

The NVDA growth has caused the portfolio risk to increase considerably -- there’s roughly 25% more risk. That’s why I don’t like to see more than 5% or 10% in a single position. The answer is to rebalance, here’s a way to get paid to do it.

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“One way with options is to get paid to rebalance by writing out of the money calls...”

	NVDA	SPY	Options	Risk
Portfolio 1	3%	97%	none	19%
Portfolio 2	22%	78%	none	24%
Portfolio 3	22%	78%	call ladder	23%

“The portfolio more than doubled but the potential for typical downmarket losses nearly tripled.”

One thing you can advise your client to do is potentially get paid to rebalance the portfolio with a ladder covered Call approach. For example, in the illustration, you can see how you're collecting over 9 thousand dollars of immediate income by selling covered calls. Half of the shares could be sold at the 200 level within one month. The other half of the shares could be sold at the 193 level within three months.

“There are many ways to deal with this, including just taking some profits & using the proceeds for taxes & rebalancing.”

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