Concentrated stock position

Using prepaid variable forward to manage concentrated stock position.  This is a very interesting concept.  Investors can use PVF to defer taxes.  PVF is constructed with margin loan on a hedged position using zero premium collar.

For example, investor has a $100 position and hedged this position with a zero cost collar; at the same time takes out a loan for $88. Long put at 95 and short call at 110, effectively locking the pay-off to a minimum of 95 and maximum of 110.  If the stock position at expiration is less than 95, investor deliver 95 worth of stock, if between 95 and 110, the investor delivers 95, if above 110, investor deliver 95 worth of shares + any value above 110.  This action will not trigger immediate taxable event and thus effectively defers taxes until the shares deliver at expiration.


Follow up update: I exited the trade before it hits sl due to reversal signals.

I almost had no motivation to post this trade.  This week’s activity is so boring.  Due to the long weekend in many countries, trading volume is so low.  I’ll make an exception to hold this long position over the weekend and hopefully next week will provide some volatility if i don’t get stopped out tonight. lol.

eurusd 04172014 EUR/USD