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Episode 77: Options for Surviving this Stock Market Thumbnail

Episode 77: Options for Surviving this Stock Market

401(k) Business Owner Planning Coasting in Retirement Financial Planning Financial Wellness Investment Management Investments Pre-Retirees Retirees Retirement Funding Wealth Management

Segment 1: 

HELLO Lower Alabama! Hello Gulf Coast! Welcome in. Welcome to Coasting in Retirement! Thanks for joining us today, Josh Null here, with a very special guest today, Jake Marriott, the Options Portfolio Manager for Aptus Capital Advisors, Jake how are you doing today? You’re joining us remotely from Naples, FL, correct? Listners, I am joining you from beautiful downtown Fairhope, and Jake and I have ready to put together probably one of the more important shows we’ve done in a while, definitely one of the more timely shows for sure. 

Listeners: Jake and I are here today to discuss financial topics relevant to those of you in or near retirement, living your best life along our part of the Gulf Coast. Here’s what we’ve got in store for you: First segment – deep dive on our topic of the day. 2nd segment - at about 30 minutes past the hour - “Headlines of the Week”. Then at roughly 50 minutes past the hour, stick around for our 3rd segment, we call it” Josh’s Crystal Ball and Big Mouth”. So buckle up, we’ve got a lot to get to!

Quick background on me for those new to the show. Again, my name is Josh Null, I am a fee-based financial advisor, I hold my FINRA Series 65 securities license, and I am the owner of Gulf Coast Financial Advisors, that is a 100% locally owned, 100% independent investment management and financial planning firm with offices in Fairhope, Orange Beach, and Mobile! You can find more information on me and the team at Gulf Coast Financial Advisors by visiting our website gulfcoastfa.com, or feel free to give us a call at 251-327-2124. If you missed that contact info, get a pen and pad ready because we will repeat our contact info several times throughout the show! 

Quick disclaimer: Aptus Capital Advisors serves as a “Sub-Advisor” to my firm GCFA, which means that Aptus helps our team at GCFA with our client’s investment accounts, including portfolio construction and trading, among the many other services they provide. What it does NOT mean is that Jake Marriott or Aptus is employed directly by, or for, GCFA. Jake’s advisory services are offered through Aptus Capital Advisors, a Registered Investment Advisor registered with the Securities and Exchange Commission and based in Fairhope, Alabama. Aptus Capital Advisors and Gulf Coast Financial Advisors are NOT affiliated.

So Jake, you and I have a very important topic today, I’ve titled this episode “Options for Surviving this Stock Market”. And I want to forewarn our listeners: we are going deep into nerdville today. We will be discussing details that may take a little bit to sink in, even for me, so I would suggest you take notes, and remember, you can always revisit this episode on Spotify and our website gulfcoastfa.com when it gets posted to both places tomorrow. But before we get in the weeds, Jake can you describe to our audience what Aptus is, and your role there?

Great. Now Jake, you were generous enough to share a powerpoint detailing our topic today, thank you for that. Listeners, we will describing somewhat complicated investing concepts around ways you can navigate not only this current stock market, but future stock markets that will undoubtedly experience more volatility as the United States, and really the world, navigates a rapidly changing investing environment. 

What we won’t be doing is recommending any specific funds, and if we do mention a ticker symbol, is strictly to use as an example of how these concepts are put to practical use. With all that said, Jake, let’s dive into a concept and product line that is exploding in popularity, Buffered ETFs. In addition to discussing Buffered ETFs, we’re also going to attempt to explain in plain English the options strategies that underly them. And speaking of options, our first segment will end with a concept for those of you fortunate enough to have a significant position in an individual stock that has grown substantially, possibly even from a very low cost basis for those of you that picked the right stock to buy in the past 

So Jake, let’s start with buffered ETFs. Would you mind to describe to our listeners what is a buffered ETF, and why you think they have emerged as a popular investing choice for many investors?

What is Buffer ETF?

  • Creates defined payout with downside buffer and upside cap
  • Replacement for structured notes: increasing liquidity, reducing fees and eliminated counterparty risk

Use Cases:

  • Tool to shift asset allocation with the goal of owning more risk assets to preserve purchasing power while keeping drawdown in line with the tradition 60/40
  • Putting cash to work in uncertain times after a liquidity event

Jake, from here I’m going to use your powerpoint to spur a Q&A around these questions (and more as we talk). I am going to save the alternative lending details for another episode: 

  • Explain what you mean on the powerpoint when you state: Since 1950, when looking at rolling 12-month returns, the S&P 500 has returned 12% or greater roughly 55.5% of the time. Below is the frequency at which different “caps” are hit on the S&P 500 since 1950 (Josh will verbally describe the chart). As expected, the higher the cap, the lower the frequency you would expect to hit the ca
  • Explain why Higher Caps = Better Buffers. The data shows that for every 1% lift in the cap, you get a bit more than 0.5% back in CAGR.
  • Why do you think having a lower expense ratio (take a beat to explain what this is) plus an option strategy results in a higher cap rate on buffered ETFs? 

Alright, we mentioned that we have a potential solution for those of you that have a particular stock that you want to ride out, or maybe your just emotionally attached to it, either way, you’re concerned about your concentrated position and a market correction. Jake, you detail option overlay strategies in your powerpoint, walk our listeners thru that:

Option Overlay Strategies

  • Strategies around low basis stock positions.
  • Could be former employees or buy and hold investors.

Buckets (Goals)

1. Income- sells calls to generate income on an otherwise non yielding asset. 

2. Transition- sells more aggressive calls to help diversify out of position more tax efficiently. 

  • Any losses in the options can be used to offset gains from the sale of underlying stock leading to tax efficient diversification.
  • After tax premium generated can be used to help pay the tax bill.

3. Hedging- protects the position from significant drawdown while avoiding the tax consequences of selling the shares outright. 

Listeners, if any of this sounds interesting to you, it’s easy to set up a follow up conversation with the team at Gulf Coast Financial Advisors. You can catch us at 251-327-2124, or find us on our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. There are flexible meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, a 30-minute zoom, or my preference, an in-person meeting at any of our 3 office locations: Downtown Fairhope, Orange Beach just down the road from the Wharf, or in Mobile off Dauphin St and I-65. Reach out to us - we would love to meet you! 

Alright folks, coming up next - There’s always a lot going on in the world! Particularly the world of finance, investments and money. Every week we scour the internet for financial articles relevant to those of you in or near retirement, then give you our honest opinion about these headlines. So join us after the break to hear Jake and I discuss this week’s relevant headlines in our “Headlines of the Week” segment. Stay tuned!

Segment 2 - News of the Week:

Welcome back to Coasting in Retirement, your host Josh Null here, alongside guest co-host Jake Marriott, the Options Portfolio Manager for Aptus Capital Advisors. As we discussed before the break, every week we scour the internet for financial articles that pertain to those of you in or near retirement. Our job, or at least we tell ourselves it is, is to help you all understand how these headlines impact you, especially when it comes to your money! Note – if you want to read our referenced articles yourself, we also include the links in our show transcript, which you can find on our website gulfcoastfa.com under the podcast tab. Now without further adieu, let’s get at it with the Headlines of the Week!

Josh: Jake, the company you work for, Aptus Capital Advisors, is all in on ETFs instead of Mutual Funds. Our first article comes from Investopedia and provides us an opportunity to discuss why that decision was made. It’s titled Mutual Funds vs. ETFs: Key Differences and Investment Insights

https://www.investopedia.com/articles/exchangetradedfunds/08/etf-mutual-fund-difference.asp 

2. Josh: Our next article is titled “Buffer ETFs Are Not for Everyone. Here’s How to Use Them in Your Portfolio”. 

https://www.morningstar.com/funds/buffer-etfs-are-not-everyone-heres-how-use-them-your-portfolio 

3. Josh: I wanted to highlight a recent post on your company’s website, aptuscapitaladvisors.com. It asks the question, are Buffered ETFs Replacing Cash?

https://aptuscapitaladvisors.com/buffered-etfs-replacing-cash/ 

4. Josh: last article of the day (if we have time). Wall Street's 'Fear Index' Jumped 10% Tuesday—Here's What That Means for Your Money

Wall Street's 'Fear Index' Jumped 10% Tuesday—Here's What That Means for Your Money

Listeners, if you want to set up a follow up conversation with the team at Gulf Coast Financial Advisors, it’s easy. You can call us at 251-327-2124, or find us on our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. There are flexible meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, a 30-minute zoom, or my preference, an in-person meeting at any of our 3 office locations: Downtown Fairhope, Orange Beach just down the road from the Wharf, or in Mobile off Dauphin St and I-65. Reach out to us - we would love to meet you! 

Alright folks, coming up next: Josh’s Crystal Ball and Big Mouth. What have been some of my predictions? Have I been right? Was I ever wrong? How wrong? What do I think is going to affect investors in the near future, or maybe the distant future? We talk about all of these things, possibly poke a little fun at my big mouth, and more importantly, we see if Jake has any predictions he would like to share. Stay tuned! 

Segment 3 – Josh’s Crystal Ball and Big Mouth: 

Welcome back! Your host Josh Null here, joined by guest co-host Jake Marriott, the Options Portfolio Manager for Aptus Capital Advisors. So, Jake, not sure what JD told you about me, but just like him and I am opinionated, I have very strong opinions at times, I would say a radio show host that isn’t probably wouldn’t be very interesting to listen to. And I am paid in my profession to offer professional guidance and opinions to my clients, so if I don’t have anything intelligent to say, just replace me with AI. I like making predictions, sometimes I hit the bullseye, sometimes I swing and I miss. Is there any crow to eat? Let’s get at with Josh’s Crystal Ball and Big Mouth and find out.  

Well, listeners, I hope you enjoyed a little peek into how we form our opinions and make predictions. We invite you one last time, if you would like to have a no-pressure, no-obligation conversation about your investing goals and retirement dreams, you can call us at 251-327-2124, or find us through our website gulfcoastfa.com. One our site, click on the blue button in the upper right-hand corner to set up a meeting on my calendar. We have several meeting choices for your convenience – it can be as simple as a 15-minute introductory phone call, all the way to an in-person meeting at any of our 3 office locations. You can find GCFA offices in downtown Fairhope, or Orange Beach off Canal Road, or in Mobile off Dauphin St and I-65. Reach out to us - we would love to meet you! 

That’s our show for this week! I want to give a huge thank you to my guest co-host Jake Marriott, thank you to the producer of the show, Payton Null, thank you to our show sponsor, Providence Partners and Jay Stubbs, thank you to our awesome radio station, FM Talk 106.5 out of Mobile, many thanks to the provider of our show music, local band Sloth Racer, and as always my sincere appreciation for all of your out there that have been listening and joining us on this journey. We would love to be a part of your journey as well! Until we talk again, have a wonderful and productive week. This has been Coasting in Retirement with Josh Null! 

GCFA Disclosure:

Gulf Coast Financial Advisors, LLC ("GCFA”) is a registered investment adviser offering advisory services in the State of Alabama and in such other jurisdictions where it is registered, filed the required notices, or is otherwise excluded or exempted from such registration and/or notice filing requirements. Registration does not indicate or imply that GCFA has attained a particular level of skill or ability, nor does it constitute an endorsement of the firm by the Securities and Exchange Commission (SEC) or any state securities regulator.

The Coasting in Retirement radio program serves mainly to disseminate general information including those pertaining to GCFA’s advisory services, together with access to additional investment-related information, publications, materials and links. The publication of this radio show should not be construed by any client and/or prospective client as GCFA’s solicitation to effect, or attempt to effect transactions in securities, nor should it be interpreted as GCFA providing personalized investment advice, or any type of professional advice, for compensation, wherever this program is broadcast. Any subsequent, direct communication by GCFA with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

Certain information, news stories, headlines, data, charts, graphs, figures or statistics presented on this radio program may have been obtained from third-party sources that are believed to be generally reliable but which GCFA may not have independently verified. GCFA does not and cannot guarantee the timeliness, accuracy, or reliability of any such third-party information and undertakes no obligation to update or correct any information that may become obsolete, unreliable, or inaccurate. The radio program also contains the opinions, views, and perspectives expressed by Josh Null and any other GCFA representatives which are solely their own, and do not necessarily reflect the opinions, views, or perspectives of GCFA as a firm. Such personal views and opinions should not be construed as endorsements or professional advice from GCFA. GCFA makes no representation or warranty regarding the accuracy, completeness, or reliability of any information on this radio program, and disclaims any liability for any direct or indirect loss or damage incurred from using or relying on such information.

GCFA, Aptus Capital Advisors, Providence Benefits and Providence Partners are not affiliated, nor are any of their respective representatives.