By Jillian Baker
Last week team ZEGA attended the TD Ameritrade Institutional conference where a large gathering of Investment Advisors and other industry leaders met in San Diego, CA. ZEGA’s own Jay Pestrichelli was among a select group of panelists talking about how advisors can use options in their investment strategies.
Often when advisors hear options, they immediately think about clients who mention they lost money trading them. Or perhaps they are a firm that also handles taxes where in the course of preparing returns they don’t see many people profit from options within their personal trading accounts. Jay typically points out that while those situations may occur, there is also no better way to manage risk, than with options. With ZEGA, options are used to act as a direct vehicle for protection.
You see, options like many tools on a belt can be utilized in different ways. One of the core approaches at ZEGA is to see the benefits from hedging downside risk using options. During the panel he pointed out ZEGA looks to de-risk it by putting in downside floors or buffers.
Jay also discussed rolling hedges and locking in gains. Money Managers that are hedging investments should realize profits and reinvest avoided losses, this process is an important step when hedging. See the video here which gives a glimpse as to one of the answers Jay gave the audience.
So next time you have conversations with clients, consider what their goals are and whether options might improve what you’re doing for them. And don’t worry, we’ve worked with many advisors to help them explain strategies in easier to understand terms.