Parametric can combine the DeltaShift index call writing process with systematic put spread buying to convert "long" equity into "hedged" equity. We call this turn-key solution ParaHedge™. The goal of the program is to decrease downside risk while providing moderate upside potential on an index which correlates to the expected returns of a client’s diversified portfolio. Underlying equity holdings or existing active manager relationships are not disrupted by ParaHedge − allowing clients to retain any manager-specific alpha.
Relative to other hedging or hedged equity strategies, ParaHedge may provide:
- A high level of customization − using listed options, Parametric can adjust levels of downside protection and upside participation.
- A high level of liquidity and transparency − using listed options, Parametric manages ParaHedge assignments as a fiduciary subject to an investment management agreement.
- Lower costs − our fully transparent approach can be significantly less expensive than more opaque hedging alternatives.
Disclosures
Structured products and options are not suitable for all investors. Please ensure that you have read and understood the current options risk disclosure document before entering into any options transactions. In addition, please ensure that you have consulted with your own tax, legal and financial advisors prior to contemplating any derivative transactions. The options risk disclosure document can be accessed at the following web address: http://www.optionsclearing.com/about/publications/character-risks.jsp.
©2011 Parametric Risk Advisors, LLC. All Rights Reserved. Parametric Risk Advisors and Design, OARS™, DeltaShift™ and ParaHedge™ are service marks of Parametric Risk Advisors, LLC. Parametric Risk Advisors, LLC is a subsidiary of Parametric Portfolio Associates, LLC. Parametric Risk Advisors, LLC and Parametric Portfolio Associates, LLC are investment advisors registered with the SEC.
Parametric Risk Advisors is the investment advisor. It is a subsidiary of Parametric Portfolio Associates, LLC, which is a majority-owned subsidiary of Eaton Vance Corp.
