SpiderRock Advisors Options Solutions

Tax-aware option overlay strategies designed to help advisors hedge concentrated stock positions, manage downside risk, and generate portfolio income — without replacing underlying holdings.
Are you a Financial Advisor? Contact an SMA specialist to learn more. Are you a Financial Advisor? Contact an SMA specialist to learn more.

What is an option overlay?

An option overlay uses listed options layered on top of existing holdings to adjust risk and income without selling the underlying portfolio.
Diagram showing how a tax-aware option overlay strategy converts a 75/25 portfolio into a 60/40 allocation to help manage downside risk and generate portfolio income

Finding the right option solution for your portfolio

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Concentrated stock

Manage single-stock risk while maintaining ownership and flexibility
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Equity portfolios

Generate income or manage downside risk in diversified equity portfolios
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Fixed income & cash

Enhance cash flow or add customized equity exposure with defined risk
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Portfolio liquidity

Access liquidity without selling portfolio assets.
Concentrated stock solutions Equity portfolio solutions Fixed income solutions Portfolio liquidity solutions
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For clients looking to… Strategy How it works Key considerations / tradeoffs Resources
Manage concentrated stock Hedged Equity Concentrated Stock (HEC) Covered Call Sells call options on the stock to generate income that may help buffer downside Limits upside potential if the stock appreciates beyond the call strike Deck
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HEC - Protective Put Purchases a put option to establish a floor on the stock’s value Requires an upfront premium
HEC - Collar Combines selling a call and buying a put to define a return range Caps upside in exchange for reduced cost of protection
Exchange Fund Replication (EFR) Uses options to approximate exposure to a diversified index or basket without selling the stock Results may differ from traditional exchange funds Brochure
Basis Hedge Uses a highly correlated proxy security to implement option strategies Effectiveness depends on correlation between proxy and stock Brochure
For clients looking to… Strategy How it works Key considerations / tradeoffs Resources
Generate portfolio cash flow Managed Index Income (MII) Writes call options on equity indices or ETFs at the portfolio level Upside participation is limited in strong markets Deck
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Opportunistic Yield Enhancement (OYE) Combines index-level and selective single-name call writing May introduce basis risk and limit upside
Reduce downside risk Hedged Equity Portfolio (HEP) - Collar Sells calls and buys puts on an index or ETF Limits upside potential Deck
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HEP - Put Spread Buys a put and sells a lower-strike put to reduce cost Protection is limited to a defined range
HEP - Put Spread Collar Combines collar and put spread structures Limits upside and provides partial protection
For clients looking to… Strategy How it works Key considerations / tradeoffs Resources
Generate portfolio cash flow Index Put Income (IPI) Sells put options on equity indices while maintaining fixed income exposure Downside risk exists during equity market declines Deck
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Cash Secured Put (CSP) Sells puts backed by cash reserves May result in equity exposure if options are exercised
Customize equity exposure with defined risk Structured Note Replication (SNR) Uses options to replicate structured note-like payoff profiles Outcomes depend on market conditions and structure Deck
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For clients looking to… Strategy How it works Key considerations / tradeoffs Resources
Access liquidity without selling assets Capital Efficient Borrowing (CEB) Uses a short box spread on S&P 500 options to generate upfront cash, repaid at option expiry with implied interest Margin call risk and potential upside limitation if a collateral hedge is used Deck
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Features

Option overlay features
Tax-aware

In some cases, option losses can be used to offset gains from the sale of underlying securities in the portfolio.

Managing for call away risk

Monitor options for assignment risk in real time and proactively roll those with high risk of assignment to prevent forced share sales.

Benefits of working with SpiderRock Advisors

Founded in 2013, SpiderRock Advisors brings comprehensive options expertise and technology to deliver actively managed customized option overlays.
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Manage for risk-adjusted returns

We seek to enhance risk-adjusted returns on both a pre- and post-tax basis. Our PMs actively manage options based on risk/return traits to deliver consistent risk management.
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Institutional scale & execution

Our proprietary technology analyzes all securities, including their volatility surfaces. Options are assessed and priced to optimize premium per unit of risk.
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Tax-aware

Our strategies seek to improve after-tax outcomes when selecting options and rebalancing, reducing assignment risk and tax friction on low-basis positions.

Options education hub

Want to learn how option overlays can help differentiate you as an advisor? Watch our Bootcamp series to see how BlackRock can help solve the multi-dimensional challenges your clients face.

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Connect with a SMA specialist

If you are a financial advisor, you can sign in to schedule a meeting with one of our SMA specialists. They can review available SMA strategies, portfolio customization capabilities, and generate client-friendly sample portfolios.
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FAQs

  • An option overlay strategy uses listed options layered on top of existing stock or portfolio holdings to modify risk and return characteristics without replacing the underlying investments.

    Option overlays are commonly used to:

    • Hedge concentrated stock positions
    • Provide downside protection strategies
    • Generate portfolio income
    • Adjust portfolio volatility

    Rather than reallocating assets, an overlay changes how a portfolio behaves across market environments.

  • An option overlay SMA (Separately Managed Account) is a customized account structure where options strategies—such as covered calls, protective puts, or collars—are implemented over a client’s specific holdings.

    Unlike ETFs or structured products, an option overlay SMA:

    • Is tailored to individual positions
    • Can hedge concentrated stock without triggering immediate capital gains
    • Allows tax-aware implementation
    • Offers transparency and customization

    Overlay SMAs are commonly used by advisors seeking tax-efficient option strategies for high-net-worth clients.

  • A concentrated stock position can be hedged using an option overlay strategy such as a collar or protective put.

    Common approaches include:

    • Protective puts, which establish a downside floor
    • Collar strategies, which combine a protective put with a call option to offset hedging costs
    • Covered call overlays, which generate income that may help cushion volatility

    These strategies help manage downside risk while maintaining ownership and deferring potential capital gains.

  • Option overlays generate income primarily through covered call strategies, where call options are sold against existing stock holdings.

    The option premium collected provides portfolio income, which may:

    • Enhance yield
    • Offset market volatility
    • Improve total return in flat or moderately rising markets

    While upside may be capped, income generation can improve risk-adjusted outcomes over time.