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.