A Volatility Chart

DeltaShift

Our DeltaShift Strategy is a managed call-option writing program that seeks to enhance total return and reduce volatility in an equity portfolio without needing to adjust holdings or allocations. It offers a beta of 0.9.

Strategy Goals

The Parametric DeltaShift Strategy is a managed call-option writing program that seeks to enhance total return and reduce volatility in an equity portfolio. It can be implemented with concentrated stock positions, diversified equity portfolios or passive indexing strategies. Our systematic, disciplined call-option writing programs seek to shift the risk-return profile of a long-equity portfolio without adjusting holdings or allocations.

Investment Philosophy

 

 

We seek to

 

 

  • Generate material incremental return versus a long only equity portfolio over a market cycle
  • Provide a cash flow hedge by generating excess cash in stressful market environments
  • Reduce volatility in all stages of the market cycle
  • Outperform passive mechanical buy-write indices

 

 

Investment Thesis

 

 

Equity index options have historically traded above “theoretical fair value”, and we expect this to continue

  • Option prices contain a “Volatility Risk Premium” (VRP) paid by option buyers to option sellers
  • The VRP is meaningful and likely to persist, it is a diversifying premium that most portfolios currently do not hold
  • A covered call portfolio can capture the VRP by selling covered options without introducing leverage

DeltaShift is offered by Parametric Investment & Overlay Strategies.  For additional information please visit the Disclosure page.

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Volatility Risk Premium
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Volatility Risk Premium

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