This is really the “golden age” for self-directed investors. At Barchart.com, information is everywhere, affordable, and at our fingertips. If you’re waiting for a “but” there, here it is: With all that information, overload is more likely than ever. And with overload comes a real risk of making mistakes. Big ones.

There was a time when people leaned on professional advisors. Many still do, for a host of great reasons. But for those who in whole or in part choose to chart their own path when it comes to what to buy and sell, and when, there’s another step that is easy to ignore. 

That is, unless someone tells you about it. Like we’re doing here.

SMCI Stock: A Roller Coaster Designed as Common Stock? 

This “Key Statistics” page on Super Micro Computer (SMCI) stock from Barchart does the talking for us. Check out those trailing returns. More than 1,300% over just the past 5 years. And that is after getting cut more than in half over the past 12 months. This is a roller coaster that trades on a stock exchange. 

SMCI’s past performance is not of great interest to those of us currently scouting it. Because while the old adage “past performance is no indication of future returns” has been proven over and over for decades, leaving a trail of arrogant investors in its wake, there’s something else to understand about past performance: We can’t have it. Because it is in the past. It’s over and done.

But SMCI is likely bringing some eyeballs back at this level. Its worst accounting-related headlines may be behind it, or at least well-known as a risk. And with nearly all of the stock’s entire “super” runup since early in 2024 now erased, the weekly chart (below) provides at least some optimism. 

SMCI: Tons of Reward, Tons of Risk. Sounds Like a Collar to Me! 

I introduced my personal approach to using option collars around volatile stocks in a recent article. SMCI sets up as a nice candidate, since it meets the following criteria, all of which can be easily screened for via Barchart.com.

• High volatility, which helps create better collar pricing.
• Liquid options market.
• Encouraging technical chart pattern.
• Low-priced stock (or ETF).

That last point is a different consideration for each investor, based on how much they have to invest, and how much they choose to allocate to a particular collared stock holding. 

To put on a collar in the manner I’m describing, it begins with owning 100 shares of stock, or another round lot (100 share multiple). 100 shares of SMCI costs around $4,200. If one had collared it up around its $120 peak, that would have cost closer to $12,000 just to own 100 shares.

The key to learning how to use collars effectively is to understand just how flexible they are. Remember that information overload noted above? It is present here too. There are scores of combinations of call options to sell and put options to buy, different strike prices and expiration dates. It is more like “make your own pizza” than “here’s a cheese pizza.”

How to Trade Super Micro Stock With an Options Collar

I’ve narrowed it down to two of many combinations of calls sold and puts purchased. These prices are as of mid-day Wednesday, May 28. 

The first example indicates that I could have bought SMCI stock at $41.58, then added a protective put struck at $41 (paying $8.40 a share) and a covered call at $55 (receiving $5.60). In round numbers, that’s a range of $55 to $41 on SMCI out to November 21, 2025, and the option pair cost me about $3 to put on.

Finally when we net out that cost of the options and apply that to the strike prices, that range of best and worst case for this holding of SMCI is $52 to $38, on that $42 stock. As shown to the penny above, $10.62 of net potential profit versus $3.38 of potential loss over this 6-month time frame. Versus the stock’s price as of this moment, that translates to about 25% upside to 8% downside, more than a 3:1 ratio.

That little downside risk for a stock this volatile is what collaring stocks is about. Because as I see it, if SMCI vaults higher to $55 within 6 months, two good things have occurred. 

First, I’m up 25% in half a year. And, if I’m still bullish on SMCI at that point, I have several, shall we say, options. I can use other options strategies or just buy more SMCI stock. 

In the market environment we are currently living through, investors owe it to themselves to be more discerning, resourceful, and tactical than they have ever been. The times demand it. And considering option collars is one of many ways to reduce the risks associated with investing.