In the Media
Wednesday, October 16th 2019
Talking Hedging, Concentrated Positions and Volatility at Texas Alts in Dallas
Options hedging, concentrated positions, challenges to implementing options and the volatility environment at the Texas Alternative Investment conference.
Summary
At the Texas Alternative Investment conference, experts discussed options hedging, concentrated positions, challenges to implementing options, and the current volatility environment. Covered call strategies can provide cushion in market downturns and reduce volatility, and introducing options through personal trading can be effective. The current volatility environment is relatively subdued, which is generally favorable for the market.
Matt Amberson, Principal at ORATS, Eric Metz of SpiderRock Advisors and Joe Burgoyne of the OIC had a lively discussion about options hedging, concentrated positions, challenges to implementing options and the volatility environment at the Texas Alternative Investment conference put on by Markets Media in Dallas yesterday.
Here are some of the comments:
Covered call strategies can provide income and cushion in markets downturns. Typical covered call strategies provided about 10% cushion in 2008 for example and a collar strategy further helped lessen drawdowns by about 20%.
Even though the market is up 20% in 2019, the covered call strategy is additive to Sharpe by reducing volatility.
The current volatility environment looks subdued with the front month below the back month. This is generally a tail wind for the market.
One of the best ways to introduce options to a firm is for the individuals of the firm to try trading options in a personal account. There is nothing like managing your personal funds to learn about what works and what does not.
More reading on covered calls here, collars here and volatility here.
Disclaimer:
The opinions and ideas presented herein are for informational and educational purposes only and should not be construed to represent trading or investment advice tailored to your investment objectives. You should not rely solely on any content herein and we strongly encourage you to discuss any trades or investments with your broker or investment adviser, prior to execution. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. Option trading and investing involves risk and is not suitable for all investors.
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Past performance is not indicative of future results. We do not, will not and cannot guarantee any specific outcome or profit. All traders and investors must be aware of the real risk of loss in following any strategy or investment discussed herein.
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Be sure to read the OCCs Characteristics and Risks of Standardized Options to learn more about options trading.
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