What is an options portfolio?

A good way to think of an options portfolio is as an investment in future business flexibility. Some examples of those options may be valued on the organisation’s balance sheet. For example, sizeable unrestricted reserves (that can be invested to earn income until needed).

Many examples of those options aren’t directly valued on the balance sheet. For example, intellectual property that has yet to be leveraged and monetised. Spare, multi-use, physical premises capacity that could be rented out or could be used if the organisation expands.  A large data warehouse of ‘clean’ data, yet to be mined for insights. Two others include process expertise in quickly entering international markets (to launch products & services) and process expertise in mergers & acquisitions, to enable non organic growth.

An options portfolio is more than just holding call and put options on publicly-traded financial instruments. It’s an owned ‘toolkit’ to be deployed when needed. An options portfolio helps you buy time or play for time, as required. This is useful in managing the risk velocity (speed of threats) aspect of risk management. An options portfolio can help strengthen all four aspects of business resilience too – protection, durability, human grit and healing rate.

Are building an options portfolio and sharpening your strategic focus opposites?

Firstly, an options portfolio gives you more choices on how to counter competitor action, or adapt quickly to regulatory change.

Secondly, building and managing an options portfolio is complimentary, not conflicting with having strategic focus. Because an options portfolio enables change, if your business strategic focus is becoming less effective (against market disruptors, sector innovation, changing customer needs), then an options portfolio helps in adapting and pivoting quicker to a new business strategy, which can still be very focused.

Simon