For wealth managers
Parametric’s DeltaShift is a managed call-options-writing strategy that can be used in conjunction with single stocks and equity indexes. DeltaShift seeks to dampen volatility while enhancing equity portfolio return by capturing the volatility risk premium (VRP).
DeltaShift is most often implemented as an overlay without the need to adjust equity holdings or manager allocations. When combined with the underlying equity exposure, DeltaShift exhibits a long-term average beta of approximately 0.9. It is designed to provide a buffer against downside risk while still maintaining some upside participation in strong up markets.
Investing in an options strategy involves risk. All investments are subject to loss. Learn more.
The effectiveness of the option strategy depends on a general imbalance of natural buyers over natural sellers of index options. This imbalance could decrease or be eliminated, which could have an adverse effect. A decision as to whether, when, and how to use options involves the exercise of skill and judgment, and even a well-conceived and -executed options programs may be adversely affected by market behavior or unexpected events. Successful options strategies may require the anticipation of future movements in securities prices, interest rates, and other economic factors. No assurances can be given that the judgment of Parametric in this respect will be correct.
Options are not suitable for all investors and carry additional risks. Investors must ensure that they have read and understood the current options risk disclosure document before entering into any options transactions. In addition, investors should consult with a tax, legal, or financial advisor prior to contemplating any derivative transactions. The options risk disclosure document can be accessed here: http://www.optionsclearing.com/about/publications/character-risks.jsp.
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Rules-based risk mitigation
What happens when a stock appreciates sharply?
- Traditional call writing means receiving an increased yield in exchange for giving away upside (being capped at a target level).
- Unlike traditional covered call writing, a key goal of DeltaShift is to maintain substantial (but not all) upside participation during times of sharp appreciation.
During these times:
- The total value of the account will likely continue to appreciate (not be capped), but it may underperform the index itself.
- We expect some share sales at these appreciated prices—though share sales may be avoided, in certain cases, by cash contributions to finance the repurchase of the in-the-money options.
Intended benefits of DeltaShift
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DeltaShift may be implemented either as a fully funded strategy or as an overlay across a range of underlying portfolios, including active equities, index funds, ETFs, or single stocks.
Attractive risk-return profile
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DeltaShift seeks to enhance returns, generate income, and reduce volatility in most market environments.
A diversifying premium
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Options prices contain a volatility risk premium (VRP) paid by options buyers to option sellers. A covered call program can capture the VRP by selling options without introducing leverage.
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DeltaShift aims to generate excess cash during down markets that may serve as a cash flow hedge in periods of market stress.
There is no guarantee that the strategy will be successful. Investing in an options strategy involves risk. All investments are subject to loss.
Why choose Parametric?
As of 12/31/2022
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