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Active PutWrite

Gain exposure to the implied volatility risk premium

Gateway's Active Index-PutWrite (Active PutWrite) strategy is a low-volatility equity strategy that secures an actively managed portfolio of written index put options1 with an underlying portfolio of short-term, high quality cash securities. This strategy is a flexible, yet disciplined approach to secured put writing with the objective of outperforming the Cboe® S&P 500 PutWriteSM Index (PUTSM Index)2 over the long term while providing investors the potential for better risk-adjusted returns than the equity market.

Maintaining a cash collateral portfolio to secure written index put options can capture the benefits of equity investing while reducing risk. If the underlying index rises, the premium received from writing the put options allows the strategy to participate in the return of the index, but generally not beyond the amount of premium received. If the underlying index falls below the strike price, the value of the written put increases and generates a loss, which is partially offset by the premium received upfront when the put was written. Depending on the magnitude of decline in the underlying index relative to the put premium earned, this can result in a smaller loss, or slight gain, for the portfolio relative to the index.

Active PutWrite focuses on writing short-term, near-the-money index put options which generate desirable cash flows and provide meaningful exposure to the implied volatility risk premium. Typically, the principal price component of the strategy’s written options is implied volatility. Because implied volatility is frequently overpriced, writing index put options creates a consistent opportunity to deliver better risk-adjusted returns than those of the broader equity market.

This strategy retains the PUTSM Index’s low-volatility equity characteristics while seeking to improve risk-adjusted returns with index put option diversification and an active response to changes in implied volatility and skew.

Low-Volatility Equity Profile

Active PutWrite strategy exhibits characteristics of high equity correlation with reduced standard deviation, which can help mitigate losses during down markets and allow for participation during market advances on a more consistent basis. The structure of the Active PutWrite strategy gives it increased equity market exposure in comparison to that of the Gateway Index/RA Flagship Strategy, which also utilizes written index options; but unlike Active PutWrite, includes purchased index put options to enhance downside protection during sudden severe market declines.

Portfolio Application

Active PutWrite is a multi-faceted strategy with flexibility to support many applications. Within a portfolio, this strategy can act as:

  • A core equity strategy
  • A complement to plan immunization/liability matching
  • A component to an alternative program

1 Selling index call options can reduce the risk of owning stocks, but it limits the opportunity to profit from an increase in the market value of stocks in exchange for up-front cash at the time of selling the call option.

2 The Cboe® S&P 500 PutWriteSM Index is a passive total return index designed to track the performance of a hypothetical put-write strategy on the S&P 500® Index.

Gateway has discretion to reduce put coverage and deviate from these guidelines.




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Gateway Investment Advisers, LLC
312 Walnut Street, 35th Floor
Cincinnati, OH 45202-9834
Phone: 513-719-1100
Fax: 513-719-1199
Boston Location
888 Boylston Street, Suite 800
Boston, MA 02199

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