Defensive Equity
Parametric’s Defensive Equity (DE) strategy seeks to provide equity-like returns with reduced volatility over a full market cycle. Investors access the volatility risk premium (VRP) through collateralized put underwriting and covered call overwriting.
For institutions particularly sensitive to volatility, reducing equity market risk in favor of pursuing the VRP smooths out returns over the long term, providing an alternative to hedge-fund strategies at a lower cost and with greater liquidity and transparency.
Investing in an options strategy involves risk. All investments are subject to loss. Learn more.
Explore more VRP solutions
A smoother ride
DE’s model-driven approach is designed to remove emotions and guesswork from the investment decision-making process.
We construct a lower-volatility portfolio by reducing equity market beta and systematically selling fully collateralized equity index options to enhance returns. Compared with a fully invested equity portfolio, DE’s combination of reduced equity exposure and the VRP is expected to realize a lower magnitude in drawdowns and a quicker recovery from stress events.
The strategy is expected to deliver the best relative performance in moderately down and sideways markets while trailing in strong rallies. DE is best suited to investors with a heightened sensitivity to equity risk seeking an alternative source of yield.
Portfolio construction
Model beta: 0.5
Intended benefits of Defensive Equity

Systematic process
Learn more >>
DE offers a disciplined and rules-based investment process designed to deliver more predictable, repeatable results without the use of market forecasts or behavioral biases.

Faster recovery
Learn more >>
The defensively structured base portfolio is designed to reduce drawdowns during stress events. Consistent exposure to the VRP aims to deliver faster recovery to prior peak valuation compared with a long-only equity portfolio.

Portfolio diversification
Learn more >>
DE gives investors an alternative return source while potentially delivering favorable risk-adjusted returns without sacrificing liquidity. It may be used as a complement or replacement for hedge funds or low-volatility equity allocations.
How it works

Strategy overview
Want to know more about Parametric Defensive Equity?
Download our strategy overview.
Why choose Parametric?

Get in touch
Want to know more about our Defensive Equity solutions? Complete our contact form, and a representative will respond shortly.
More to explore
Understanding the Recent Surge in 0DTE Options

by Perry Li, Senior Investment Strategist
August 24, 2023
Read why 0DTE options—once reserved for large institutions—are now popular among even the smallest investors.
What Is Overlay? A Look at Four Common Applications

by Antony Motl, Portfolio Manager
August 14, 2023
Can an overlay program help investors increase expected return and reduce tracking error relative to a targeted policy allocation? In this paper we delve into the most common overlay components to explore how such a framework allows for seamless integration with investment staff, underlying investment managers, and other stakeholders.
Why a Talented Trading Desk Matters for Fixed Income SMA Investors

by Brian Barney, Managing Director, Institutional Portfolio Management and Trading
July 5, 2023
Across the fixed income asset class, trading efficiency matters more than many investors realize. See how our technology makes it happen.