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While I am a huge fan of using option collars around my stock positions, my real preference is to create what I call “dog collars.” That’s where the stock I collar is one that is, shall we say, down on its luck. An equity market “dog.”
My goal with these trades is to position for a high-octane comeback story while simultaneously managing my risks. That allows me to have the courage to take a much larger position than I normally would. Because I am, after all, a “chicken” when it comes to investing. I have that habit to thank for surviving decades as a professional investor.
