Our BlogOur current view on the market
Last month we posted for the first time ZEGA’s Buy and Hedge hedged equity performance against its peers. After the positive feedback and opportune end of year timeframe, we wanted to share the 2017 final data.read more
After running the numbers today ZEGA’s traders were able to find a short call spread trade that qualified under our rules for entry. Over the history of the HIPOS strategy, the times we have utilized the call side have been infrequent at best. We know that most...read more
Click here for a PDF version of our December performance...read more
2018 has opened the year higher amidst further low volatility and little fear in the markets. 2017 saw so little fear that the VIX Index closed below 10.00 over 50 times! The graph above, part of a recent Wall Street Journal article by Gunjan Banerji illustrates just how un-fearful investors have been over the past year. Statistically, 2017 would be considered a fairly large outlier event compared to previous years.
In the article there were a couple of main themes or attitudes Banerji uncovered:
Data Source: YCHARTS
As we enter 2018 volatility measured by the CBOE VIX Index is at historically low levels. Looking above at the chart we can see going back to 1990 where this current environment sits. So, what does this mean for a strategy like our HIPOS (High Probability Options Strategy)? Since we sell volatility far away from the current Index level, low volatility makes it more difficult to find trades which will qualify under our strict criteria. The reason being is that when volatility is extremely low, the premium available from the sale of a spread is depressed in value.
In writing this article I decided to do most of the explaining through what I would call some smart looking graphs and tables. It is the holiday season so who wants to do a bunch of math right? This article stems from a conversation ZEGA Co-Founder Jay Pestrichelli and I recently had around how advisors can help their clients out by designing portfolios that look to deliver what they need. Especially those ten or twenty years away from retirement or newly retired. Too often both advisors and their clients might become too worried about whether they are beating the overall market with returns. Instead, wouldn’t it be more productive to focus on what they need in assets to produce the right type of income in retirement? Another way to look at what it will take to grow assets to a clients desired amount is to ask, “How Many Doubles Do You Need”?read more
Each month we regularly report performance on this blog. But what we don’t share that often is how our strategies are faring against our peers. It may require a little explanation, but here is how our Buy and Hedge Master Composite returns are doing compared to other hedged equity products out in the market place today.read more
Someone recently asked me if I was surprised the Dow Jones reached 24,000 and if this marks the top in the market? My quick answer was no due to some old technical analysis of long term patterns in various markets. On the is this the top question? Well, we will know it once it happens. Regular readers know that the ZEGA message on equity ownership is to be long, but be hedged or buffered! The idea being why not participate in the upside but cap the downside just in case? This message hasn’t changed much over the years for our suite of hedged equity or buffered strategies.read more
Click here for a PDF version of our November performance...read more
The IAS strategy made a significant posture change today. And it was a rare posture change for us. First, some background:
Markets tend to reward companies that are growing faster than expectations. Growth is always a factor that attracts a premium in stock price.
But there are market conditions that will cause successful growth companies to lose their premium on a temporary basis:
1. Market Corrections
2. Investor Rotations to Value from Growth
3. Policy change that benefits specific industries