A Volatility Chart

Risk-Managed Put Selling (RPS)

Our Risk Managed Put Selling strategy is designed to generate returns that are less correlated to Fixed Income assets while generate returns when equity markets are up, flat, or moderately down while limiting downside risk to 5%.

Strategy Goals

An S&P 500® Index put option spread selling strategy to generate tax friendly premium with low volatility and defined risk.

  • Seeks to increase returns by 1.00% - 4.00% (net of fees) on underlying collateral by selling out-of-the money put spreads on the S&P 500® Index
  • Underlying collateral can be any marginable security (bonds, stocks, cash, etc.)
  • Seeks returns that are uncorrelated to fixed income investments
  • Strategy looks to take advantage of the general imbalance of natural buyers of equity index options versus natural sellers
  • A separate account linked to the managed account holds the index put option positions

Investment Philosophy

We believe that clients can benefit from this Volatility Risk Premium. By systematically selling put option spreads over time, and carefully managing risk, our goal is to produce options profits when equity markets are up, flat, or moderately down, thus adding to returns of the underlying assets in these market environments.

To allow our clients to benefit from this Volatility Risk Premium, we have created Risk Managed Put Selling (RPS), a systematic, disciplined overlay strategy. As an overlay, it is used in conjunction with underlying portfolio exposure chosen by the client. 

 

Portfolio Investments

 

  • Underlying collateral can be any marginable security
  • Index put option spreads sold against a portion of, or all of, the portfolio
  • The Client would maintain one or more collateral accounts linked to the options account

 

Objectives

 

  • Seeks to increase returns on underlying collateral
  • Seeks returns that are generally uncorrelated to bond investments
  • Limit any 28 consecutive day maximum loss to 5% or 10% of the Client specified program size

 

Implementation

 

 

To implement the strategy, we have developed criteria for choosing options which we believe can maximize the likelihood of capturing the Volatility Risk Premium.


Risk-Managed Put Selling is offered by Parametric Investment & Overlay Strategies.  For additional information please visit the Disclosure page.

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Volatility Management

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Volatility Management

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