BALANCED SHORT VOL
High Growth Potential
Actively harvests the risk premium observed VIX and VSTOXX futures using transparent Exchange Traded Products (ETPs).
Employs the diversity of three unique volatility strategies to trade six popular volatility ETPs in one managed account.
Goes beyond front month VIX exposure by investing in European volatility and the longer dated VIX term structure.
The Balanced Short Vol Strategy harvests the Risk Premium observed in VIX® and VSTOXX® futures using an actively managed portfolio of six Exchange Traded Notes and Funds. The Strategy is unique in employing three popular and separate approaches in one managed account and benefits from the diversity of independent strategies implemented access separate volatility markets.
Returns come from three separate but related sources: the premium hedgers pay over realized volatility for equity index options (Volatility Risk Premium), the further premium hedgers pay for volatility futures over the price implied by equity index options (Futures Risk Premium), and, to a lesser degree, the tendency for measures of implied volatility like the VIX® and VSTOXX® Indexes to mean revert over time. Like the premium collected by insurance companies, Volatility Risk Premium and Futures Risk Premium can be collected by volatility investment strategies. We apply three approaches to collect these premia:
> Absolute measures of volatility futures’ contango and backwardation
> Momentum changes in Volatility and Futures Risk Premium
> Trends observed in the implied and realized volatility of the S&P 500