In a previous blog post (What is an Overlay?), we discussed how investors who utilize overlays do so with the goal of reshaping the potential investment outcomes with the most common goals being:
- Generating supplemental income/return (typically through covered call or put writing strategies
- Reducing the risk of the existing portfolio beta exposure (typically through collar strategies)
For investors seeking additional income, it is our belief that the best way to achieve this outcome is through a disciplined put spread writing program that provides investors with a relatively conservative stream of income that supplements the income/total return of the assets in the underlying.