I have a conundrum.
I have a stock that has had considerable price appreciation over the past year. Well over 100%. I no longer see any factor (or fundamentals) supporting it's current price (in the short term). Having said that though the long term may well see further price appreciation, but I believe that to be 6-9 months+.
I have three options in trying to protect the capital / unrealized profit:
1) Sell the stock. Something I don't want to so because I like it for the long term and don't want to take a tax hit now. 2) Buy an near OTM put - thereby instituting a protective put strategy. 3) Create a Collar on the position.
This is my predicament. Do I use option (2) or (3)?
(2) Is quite feasible for a shorter dated option <45 days. It's not expensive to buy an OTM put and therefore won't erode capital/unrealized-profit. Buying a longer date put ~100 days is much more expensive and therefore will erode capital.
(3) I have priced and can create a zero cost collar for a longer dated option ~100 days but for this to work (zero cost) I will have very little upside before the stock would be called.
(3.1) Buy a longer dated put (6 months) and sell shorter dated calls (1 month) over time to recover the premium paid.
The stock is reasonably volatile so for option (3) it could potentially move in to be called in the short term.