Friday, May 29, 2020
Our April Market Perspective focused on
how the Volatility Risk Premium (VRP) has changed over time and noted that its
first quarter of 2020 inversion reached record-setting levels in February. VRP
has been positive since mid-March, and averaged 14.23 from March 17 through
April 28, i.e. the 21-day1 realized volatility period ending May 27.
[1] Equity
and index option markets are open approximately 21 days per month, on average.
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Monday, May 25, 2020
Investment strategies that combine broad-based equity market exposure with index option writing offer the potential for a consistently lower risk profile and enhanced risk-adjusted return. In this type of strategy, the primary source of enhanced risk-adjusted return is the volatility risk premium (VRP). VRP derives from the phenomenon of the implied volatility component of index option prices frequently exceeding the realized volatility experienced by the underlying index.
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Tuesday, May 12, 2020
Read our Q1 Active Putwrite Commentary for a review of strategy performance and positioning during the quarter.
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