Stream 02
LEAPS Options
Long-dated calls on Confluence names. Asymmetric upside, defined downside.
Process
We don't write options. We buy time.
The options book is a geared expression of the equity book. We do not write premium. We do not sell volatility. On Confluence-flagged tickers with a composite score above 35, we buy 6-12 month dated calls struck at 0.5-0.7 delta, deep enough to be path-tolerant and far enough out to let the chorus play out.
The thesis is mechanical. If the chorus is right and we are early, the option compounds the equity move two to three times. If the chorus is wrong, the loss is capped at the premium paid. We do not roll losers. We do not average down on premium. The position either works inside its window or it expires worthless and we move on.
Tickets are sized as a fraction of the equity ticket they hedge or amplify. The option is never a standalone view — it is always paired with a Confluence name we also hold (or would hold) on the cash book.
Why long-dated
Gamma matters less than time.
Short-dated options are a bet on the next two weeks. The Confluence engine does not have an opinion on the next two weeks — it has an opinion on the next two quarters. Six to twelve months of tenor lets the chorus actually play out.
Theta on a 6-12 month option is small relative to the implied move on a name scoring above 35. We treat theta as the cost of conviction — a cost we are willing to pay because we have removed the path-dependence that kills shorter tenors.
Vega is the second-order risk we accept. When implied volatility compresses on a Confluence name, we lose. When it expands, we win. Over a long enough horizon, on names where the chorus is loud, vega has been our friend more than our enemy. We do not hedge it.
Status
Engine in build.
We are honest about where this is. The strike-selection logic is mocked at a proof-of-concept level — given a Confluence ticker and a 6-month horizon, the engine picks a 0.55-delta call closest to the listed expiry. That works on paper. It is not ready for capital.
Paper trades will start when the Confluence engine has six full months of live track. We are not going to fake numbers on a stream that has never traded. The equity book has to earn its track record before the option overlay sits on top of it.
Expected timeline: paper trades begin 2026-Q4, post-paper review 2027-Q2, live capital allocated only after both the equity book and the option overlay clear walk-forward independently.
Risk frame