Your browser does not support JavaScript
Insights
 

Insights


An Update on the Volatility Risk Premium (VRP)
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.

gia, blog, insights, gateway investment advisers

Source: Bloomberg, L.P.


The VRP average since March 17 is nearly three times the average positive VRP reading since September 2008 and, as the longer-term chart shows, recent VRP readings are the highest since December 2008. Writing index options in this environment has strong potential for enhancing risk-adjusted returns while achieving a lower-risk profile than the broader equity market.


gia, blog, insights, gateway investment advisers

Source: Bloomberg, L.P.





1Equity and index option markets are open approximately 21 days per month, on average.



 

Categories

  • U.S. Market Recap
  • U.S. Market Perspective
  • Quick Takes
    • An "All Clear" Signal?
    • An Update on the Volatility Risk Premium (VRP)
    • Should Election Year Volatility Concern Investors?
  • Flagship (Index/RA) Commentary
  • Active Overwrite Commentary
  • Active Putwrite Commentary
 

LOOKING FOR MARKET INSIGHTS?

CHECK OUT OUR LATEST PERSPECTIVE

Learn More ›

Headquarters
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

.      .
© 2020. Gateway Investment Advisers, LLC.
California Consumer Privacy Act
Gateway Investment Advisers, LLC
NATIXIS Investment Managers