Jay Pestrichelli Visits The Street, Discusses the Importance of Hedging
By Jillian Baker
Jay got into the nitty gritty of hedging yesterday with Katherine Ross of The Street. Jay explained the importance of hedging as a source of protection, which can limit and better manage risk for your clients.After Katherine heard the benefits to hedging, of course her main question was, “Why don’t more people know about this?”
Read and watch Jay’s interview here:
Jay got into the nitty gritty of hedging yesterday with Katherine Ross of The Street. Jay explained the importance of hedging as a source of protection, which can limit and better manage risk for your clients.After Katherine heard the benefits to hedging, of course her main question was, “Why don’t more people know about this?”
This is a common question posed to ZEGA by advisors, media, and clients. Jay explained that many people think of options as risky and speculative. They are right in thinking that since many people do in fact “speculate” with options. Advisors who also handle taxes comment that they rarely, if ever see clients who have used options in a speculative way be profitable. Most likely, they were not hedging as a way of managing risk – they were hedging to try for greater returns.
While that is a prevailing opinion, options are incredibly flexible, which is what allows ZEGA to utilize them and reduce portfolio risk. Jay explained that we primarily use options to lower the risk of an investor’s portfolio. This understanding of protective strategies is a core differentiator that we take pride in here at ZEGA.
Think back to the 2008-09 period where drawdowns on the S&P 500 Index were over 50%. If advisors had used a well-designed hedging strategy, they might have limited losses to an acceptable level and preserved clients’ equity, many of whom were getting closer to retirement. Not only that, but a core function of our hedged equity strategies is to buy more shares at market lows using either avoided losses or hedging profits.
This way, if markets recover your clients may own more shares when the markets rebound. If nothing else, why not employ a hedging strategy that at least removes some fear?
ZEGA has been utilizing hedged strategies for years now and we stand by it. Check out our Buy & Hedge Strategies here. Better yet, now might be a better time than ever to take a new look at just what hedging with options can do for your clients.
Read and watch Jay’s interview here: