BENEFITS OF A PROFESSIONALLY MANAGED
CALL WRITING PROGRAM

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.

DELTASHIFT Vs. SELF-DIRECTED
  • Disciplined, transparent covered call writing program
  • Options chosen to systematically balance option income versus stock retention goals
  • Short-term options written to minimize event risk and capture numerous small option premiums
  • Focus on a risk-adjusted return and exit process
  • Often a tactical or reactionary decision based on recent stock price changes
  • Tends to focus on capturing large option premiums without rigorous analysis of the attendant risk of selling underlying stock
  • Lacks a methodical exit strategy for settling the transaction

 

WHAT IS THE SOURCE OF THE POTENTIAL EXTRA RETURN FROM THIS STRATEGY?
There is often a supply/demand imbalance for many equity options. Investors generally buy call options to speculate on the potential appreciation of a stock and buy put options for protection from a potential decline. The only "natural" seller of a call option is the long-term owner of a concentrated equity position. Other sellers of options, including banks, broker/dealers and institutional traders, incur costs to hedge option positions and seek to generate a per-transaction profit.

A concentrated equity holder (without the hedging and other costs of a dealer) is in the unique position to take advantage of prices that are often at higher levels than their theoretical value due to these extraneous costs. Over repeated option cycles, Parametric maintains that a quantifiable, expected profit exists and can be realized.