Think about volatility as an asset, not a liability.
Through our affiliate, Parametric Risk Advisors, Parametric offers DeltaShift, a managed covered call writing program for investors who hold concentrated stock positions or equity portfolios.
Parametric believes that professional management of options and derivatives gives both our private and institutional clients powerful tools to manage risk and shape return. Investors of all types are increasingly exploring the role of options in their overall strategies. We have observed that arbitrage opportunities enabling investors to profit from volatility in the equity option market not only exist, but also are persistent.
Parametric’s DeltaShift programs seek to improve risk-adjusted total returns and enhance income. It is a transparent, consistent investment methodology with a focus on client goals, efficient operational processes, and yield enhancement.
- Potential yield enhancement and increased total return
- Reduced portfolio volatility
- Tax-efficient settlement process
- Professional management that improves the odds of program success
While covered call writing is considered a relatively straightforward strategy, most investors do not have the expertise or patience to efficiently implement a successful call writing program on their own. Too often, calls are written on an ad hoc basis seeking high premiums at the expense of maintaining potential growth and the program ends after several cycles with the stock being called away unexpectedly.
A managed covered call writing program provides significant value by introducing discipline and professional management into what is typically a series of "one-off" events.
In contrast to individual investors who often write only a few higher premium options, DeltaShift uses a portfolio of shorter-maturity and out-of-the-money options to reduce exercise risk.
|Disciplined, transparent covered call writing program||Often a tactical or reactionary decision based on recent stock price changes|
|Options chosen to systematically balance option income versus stock retention goals||Tends to focus on capturing large option premiums without rigorous analysis of the attendant risk of selling underlying stock|
|Short-term options written to minimize event risk and capture numerous small option premiums||Lacks a methodical exit strategy for settling the transaction|
|Focus on a risk-adjusted return and exit process|
DeltaShift is a discretionary call writing investment management service of Parametric Risk Advisors, LLC (PRA). This information generally describes how this strategy works, but it is not a complete description of DeltaShift or how PRA performs its investment management responsibilities. Past performance is not a guarantee of future results.
The sale of stock will produce tax consequences for U.S. taxpayers. Each option transaction also produces a tax consequence. Prior to undertaking the DeltaShift service, you should discuss with your personal tax adviser how the options transactions and any sales of underlying stock will affect your tax situation. Neither PRA nor Parametric Portfolio Associates provide tax advice.
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™ and DeltaShift™ 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.