Volatility as an Alternative Source of Return
Short volatility strategies serve institutional investors as alternative sources of return. On the capital market, the volatility risk premium follows the principle of an insurance cover. It is possible to receive it as capital market participants expect higher volatility in the long term than it occurs in reality. This risk premium can be invested through option transactions.
Proven Quantitative Investment Strategy
The investment funds are based on a rule-based and forecast-free investment process. Only exchange-traded options are used in order to implement a favorable and efficient allocation.
Implementation is carried out via a short strangle, with simultaneous out-of-the-money call and put options being sold. This allows the performance in sideways markets to be strengthened and the hedge costs in oscillating markets to be limited to a moderate level.
Sophisticated Risk Management
The foundation of the investment process is our proprietary risk management. The focus is on the intelligent limitation of the delta – i.e. the dependence of the option price on the price change of the underlying asset – within a defined variation corridor.
Due to the low correlation of volatility risk premiums to traditional asset classes, these strategies can help investors to improve their risk-adjusted returns over the long term.