Single Stock Risk Management
Hedging & Yield Enhancement
Gateway’s Single Stock Risk Management Services seek to protect value and reduce active exposures of concentrated positions using options. Unrealized capital gains on individuals positions often make rebalancing and diversification alternatives difficult and expensive. The transparent and straightforward aspects of Gateway’s approach, using highly-liquid, exchange-traded option contracts, can offer investors the ability to protect the value of concentrated positions or generate additional income from premiums.
Gateway takes a collaborative approach, working with Advisors and their clients in designing a uniquely tailored and largely systematic investment plan that seeks to achieve investment goals as efficiently as possible and can be adjusted as investor circumstances change.
What is Single Stock Risk Management?
Single-Stock Hedging & Monetization is a highly customizable, collaborative solution designed to meet each client’s specific objectives, whether wealth preservation, income generation, or a combination of the two.
All parameters are documented in a Custom Mandate Form that serves as the ongoing operational framework for the account. Gateway continuously monitors positions and makes tactical adjustments within these pre-defined guidelines, providing flexibility while maintaining alignment with client goals.
Single Stock Risk Management Features
Wealth Preservation
Single stock options strategies that focus on seeking downside protection
- Protective Collars
- Put Spread Collars
- Put Purchasing
Income Generation
Active single-stock option selling strategies for cash flow generation
- Covered Call Writing
Customization & Experience
Extensive team experience designing options-based solutions
- Customized expertise for a modern portfolio
- Pioneer of options-based separate account strategies since 1977
Why Gateway?
A Legacy of Innovation
Founded in 1977, Gateway is a pioneer in options-based investing – first using options shortly after modern contracts began trading. Over nearly 50 years, the firm has developed a single-source, unified framework for alpha and risk management, applying a rigorous, quantitatively driven approach to navigate market complexities and seek to unlock value.
Strategy application
Generate cash flow with disciplined option selling.
Covered calls aim to generate income through the combination of owning shares of a stock and selling (or writing) call options against those shares.
Shield downside risk
Put purchases seek to protect against downside risk with the combination of owning shares of a stock and buying put options to protect against a decline with upfront defined cost.
Protective collars are a combination of owning shares of a stock while simultaneously buying put options and selling call options against those shares to aim to protect against a decline with low to zero cost, offering a strategic exit plan.
Customizable to specific client positioning and goals
To bring forth a solution to clients’ more complex goals, Gateway can assist with generating a unique strategy that aligns with the client’s goals and objectives.
Potential Benefits for Clients
Measured, Active Management
Incremental changes seek to minimize realized losses, capture time decay, and preserve flexibility. For example, out-of-the-money (OTM) calls are typically repurchased and reset to target delta, and calls that move in-the-money (ITM) are gradually rolled up and out.
Built Around Client Need
Strategy structure, delta targets, time horizons, coverage levels, risk protocols, and the balance of income versus protection are set with the client and their advisor, then revisited as circumstances or goals change.
Transparent and Liquid
Gateway’s programs use exchange-traded options in separately managed accounts, offering transparency with market pricing and regular reporting. Account balances, positions, and trade confirmations are available online through the custodian, with no lock-up.
Frequently Asked Questions
Who is Single Stock Risk Management designed for?
The service is generally suited to risk-conscious, tax-aware investors holding large, concentrated positions in one or more individual stocks, where unrealized capital gains make rebalancing and diversification difficult and expensive, and to the advisors working with them. Gateway’s stated account minimum is $500,000.*
*Minimums are subject to change and may be waived at Gateway's discretion; custodians and prime brokers impose their own minimums, which vary by margin type. Gateway does not provide tax advice. Tax treatment and rates can and do vary over time. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with his or her investment and/or tax advisors. *Other custodial options may be available per client request. See Important Disclosures below.
What is a covered call program?
A covered call program combines owning shares of a stock with selling call options against those shares. Short calls typically range from 10–25 delta with 7–60 days to expiration, customized to the client’s willingness to cap upside and desired income level. Out-of-the-money (OTM) calls are typically repurchased before expiration and reset to the target delta. Calls that move in-the-money (ITM) are gradually rolled higher and out in time.
How does a protective collar work?
A protective collar combines owning shares with buying put options and selling call options against them. Puts typically range from 15–25% out of the money, and call premiums offset the cost of protection — often generating a net credit rather than requiring upfront payment. Collars typically run 6–24 months to expiration. The trade-off is capped upside at the call strike level.
How is each program customized?
All parameters are documented in a Custom Mandate Form that serves as the ongoing operational framework for the account, including strategy structure, delta targets, time horizons, coverage levels, rolling and assignment guidelines, the balance of income versus protection, and tax considerations. Gateway makes tactical adjustments within these pre-defined guidelines.
Gateway does not provide tax advice. Tax treatment and rates can and do vary over time. Investment decisions should be made based on an investor's objectives and circumstances and in consultation with his or her investment and/or tax advisors.
Important Disclosures
Past performance does not guarantee future results. This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy or sell securities, and is not provided in a fiduciary capacity. This information does not consider the specific objectives or circumstances of any particular investor or suggest any specific course of action. Gateway does not provide tax advice. Tax treatment and rates can and do vary over time. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her investment and/or tax advisors. Short selling and the use of leverage involve additional risks, including the possibility that losses may exceed the amount originally invested. Options involve risk and are not suitable for all investors. Gateway Investment Advisers, LLC is an affiliate of Natixis Investment Managers.