Frequently Asked Questions

How We Work

At Soman Advisors, our process is designed to give clients professional portfolio management while maintaining full transparency, control, and custody of their assets. Soman Advisors is entrusted to manage investments—not to hold assets—so clients can invest with confidence.

Client-Owned Accounts:

Clients open and maintain a Schwab brokerage account in their own name with options trading privileges. All account opening and authorizations are completed securely via DocuSign.

Funding the Account:

If needed, clients transfer cash and/or securities directly into their Schwab account. Soman Advisors never takes possession of client funds.


Advisory Relationship (via DocuSign):

  • Client Advisor Agreement

  • Strategy Selection Acknowledgment

  • Receipt of Soman Advisors Brochure Acknowledgment

  • Limited Power of Attorney (LPOA) for discretionary investment management

  • Fee Deduction Authorization


Portfolio Management & Safeguards:

  • Soman Advisors manages portfolios on a discretionary basis

  • Management fees, as agreed, are deducted monthly by Schwab

  • Soman Advisors cannot withdraw or transfer funds or securities

  • Clients retain full custody and ownership of their accounts at all times

Transparency & Reporting

  • Schwab provides monthly account statements directly to clients

  • Schwab generates all required tax reporting documents (e.g., Form 1099)

Our Philosophy

  • Independent custody

  • Clear separation of roles

  • Strong client protections

  • Ongoing visibility into account activity

Steps and Workflow

  • Client opens/selects a Schwab Brokerage account in their name with Options privilege (DocuSign)

  • If necessary, client transfers Securities (and/or Cash) into their selected Schwab account

  • Client signs following with Soman Advisors (DocuSign):

    • Client Advisor Agreement

    • Client Strategy Selection Acknowledgment

    • Receipt of Soman Advisors Brochure Acknowledgement

    • Limited Power of Attorney (LPOA) to Soman Advisors. Discretionary Account Management

    • Soman Advisors Fee deduction Authorization
      (Agreed Management Fees deducted by Schwab monthly)

Note :

  • Soman Advisors can not transfer funds or securities from the client account

  • Client maintains custody of the account

  • Schwab generates monthly statement of the account

  • Schwab generates required Tax Filling documents (1099 etc.) for the client

  • Complete transparency of the account and discretionary trading

Frequently Asked Questions

What is governing formula for Options Pricing?

Black–Scholes–Merton Framework with Dividends

 

1. Option Pricing Formulas (Continuous Dividend Yield)

 

CALL Option Price

C = S e^(−qT) N(d₁) − K e^(−rT) N(d₂)

 

PUT Option Price

P = K e^(−rT) N(−d₂) − S e^(−qT) N(−d₁)

 

2. Parameter Definitions

d₁ = [ ln(S/K) + ( r − q + σ²/2 ) T ] / ( σ √T )

d₂ = d₁ − σ √T

 

S : Current underlying asset price

K : Option strike price

T : Time to maturity (years)

r : Continuously compounded risk-free interest rate

q : Continuously compounded dividend yield

σ : Annualized volatility

N(·) : Cumulative standard normal distribution function

 

3. Put–Call Parity (with Dividends)

 

C − P = S e^(−qT) − K e^(−rT)

Soman Advisors strategies focus on Interest Rates, Dividends and Volatility aspects of the above equations

Can you summarize rights and obligations of Calls and Puts transactions?

Rights and Obligations. Calls and Puts (American Style Options)

CALLS

IF BOUGHT (Debit)

Right to Buy shares at strike price anytime before expiration period

IF SOLD (Credit)

Obligation to Sell shares at strike price anytime before expiration period

PUTS

IF BOUGHT (Debit)

Right to Sell shares at strike price anytime before expiration period

IF SOLD (Credit)

Obligation to Buy shares at strike price anytime before expiration period

What are IRS 1256 Code contracts? What are their tax advantages?

IRS Code 1256 applies to Options transactions on broad based Market Indices like SPX, NDX, DJX and RUT. These options are Cash Settled on the Expiration Date.

Gains and Losses from these transactions are treated as 60% Long Term Gain/Loss and 40% Short Term Gain/Loss. This treatment applies irrespective of the duration over which these positions are held. All the brokers identify these on 1099 Form.

What is the minimum Portfolio value needed to engage with Soman Advisors?

Minimum optimal Portfolio value is US $1M (One Million). This is generally tied to the notional value of one single S&P 500 Options Contract.

Disclaimer and important information

  • The strategies listed are for Illustration and Education purposes only

  • There is no explicit or implicit guarantee of future performance of these strategies

  • All investments involve risk of loss of Principal

  • These strategies rely on Options instruments which are derivative products and have their own risks

  • Contact Soman Advisors for further discussion of these strategies

Soman Advisors, LLC is a California-registered investment adviser. Information is for educational purposes only and does not constitute investment advice.

All investments involve risk, including loss of principal. Options and derivatives strategies involve additional risks and may not be suitable for all investors.

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