A Volatility Chart

Dynamic Put Selling

Our Dynamic Put Selling Strategy is an absolute return strategy that captures VRP through the sale of fully collateralized equity index options. It offers a beta of 0.1.

Strategy Goals

The Dynamic Put Selling (DPS) strategy seeks to capture the financial volatility risk premium (VRP) embedded in index options. This strategy creates contingent equity exposure through a core position in US Treasury Bills, combined with fully covered short positions in S&P 500® Index put options (no leverage). DPS is designed to capitalize on the tendency for index put options to trade at implied volatilities that exceed subsequent realized volatility. 

As one of Parametric’s Volatility Risk Premium (VRP) strategies it is designed to capitalize on the tendency of implied volatility to exceed subsequent realized volatility. Through the systematic sale of equity index options, the strategy attempts to harvest the volatility risk premium – a historically persistent and significant return stream – without the use of leverage or market forecasts. These strategies are designed to increase portfolio diversification at a lower cost than traditional alternative investments, without sacrificing liquidity.

Investment Philosophy

 

Performance Objectives

 

  • Long term (full market cycle) objective is to produce average total returns that exceed US Treasury Bills + 3.0% to 3.50%
  • Achieve positive returns in all but significant down markets

 

Investment Thesis

 

  • By selling fully collateralized equity index options, the Dynamic Put Selling (DPS) strategy captures the Volatility Risk Premium (VRP) in a disciplined, systematic manner

Dynamic Put Selling is offered by Parametric Investment & Overlay Strategies.  For additional information please visit the Disclosure page.

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Volatility Risk Premium
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Volatility Risk Premium

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