On October 2nd 85 financial professionals attended a panel discussion at CBOE on “Managing Risk and Yield in a Low Interest-rate Environment: Options-based and Low Volatility Strategies.”
The three panelists were —
- (1) Mr. Scott Maidel, CFA, CAIA, FRM, senior portfolio manager in the equity derivatives group for Russell Investments and co-portfolio manager of the new Russell Strategic Call Overwriting fund. Russell Investments has more than $150 billion in assets under management and is headquartered in Seattle, WA.
- (2) Mr. John Gambla, CFA, FRM, PRM, a Senior Portfolio Manager for the Alternatives and Active Equity Investment Team at First Trust Advisors L.P. John is a portfolio manager for the new First Trust CBOE S&P 500 VIX Tail Hedge Fund (VIXH). First Trust Advisors, L.P. is headquartered in Wheaton, IL and has approximately $56 billion assets under management or supervision as of July 31, 2012.
- (3) Mr. Edward McRedmond, Senior VP – Institutional & Portfolio Strategies, Invesco PowerShares, a firm headquartered in Wheaton, IL with franchise assets of over $65 billion that offers more than 140 ETFs, including the PowerShares S&P 500 BuyWrite Portfolio (PBP) and PowerShares S&P 500 Low Volatility Portfolio (SPLV).
The panelists considered a variety of topics on risk management, low volatility, and options-based strategies. A panelist noted his expectation that options-based will continue to experience great growth over the next decade. Two of the many charts presented are shown below.
VXTH AND BXY INDEXES
As shown on the chart below, in the time period from March 31, 2006 through Sept. 28, 2012, the top performers of the indexes shown in terms of returns were the VXTH Index (up 51%) and the BXY Index (up 43%).
PAPER BY RUSSELL INVESTMENTS
The paper by Russell Investments – “Capturing the Volatility Premium through Call Overwriting.” (July 2012) http://bit.ly/Russell-Buy-Write has several good charts on use of 1-month and 1-week options. Exhibit 1 of the paper showed risk and return for the BXM and BXY indexes. The paper notes that “Covered call writing has historically benefitted wealth creation and lowered overall wealth creation …”
PICTURE OF EVENT
In the picture below are (clockwise from top left) – John Gambla, Barry Feldman, Adam Cohen, Scott Maidel, Ed McRedmond, and Matt Moran.
For more information on indexes and research papers, please visit www.cboe.com/benchmarks