Investors are turning to covered calls to hedge single stock risks while diversifying portfolios amid Wall Street’s record-breaking rise. Portfolio managers see more adoption of this strategy among those with large tech stock positions, baby boomers, and corporate executives with legacy holdings.

Advisors are customizing covered calls to help clients slowly sell stocks, diversify holdings, and manage taxes. The covered call trade involves selling calls on owned stocks to earn premium income. Up to $15 trillion of concentrated stock positions are seen as ripe for covered calls and similar strategies.

S&P 500’s 30% rise since April is prompting holders to manage gains. Aptus is structuring trades with shorter duration for individual clients’ separately managed accounts, helping them deal with stock risks from Amazon to Walmart. SMAs are expected to grow to $3.15 trillion in 2025.

The popularity of covered calls has been growing, with assets in ETFs focused on derivative income strategies reaching $150 billion. Investors are looking to diversify their portfolios by taking money off the table and minimizing tax liabilities through covered calls. Reasons for seeking an exit strategy vary by individual.

Read more at Yahoo Finance: Wall Street’s record rise spurs growth of covered call strategies