Some are calling options the perfect asset since they provide superior risk/reward profiles when combined with underlying asset portfolios
All Nations® option enhanced strategies combine underling asset portfolios with systematic, theoretically robust option methodologies and result in superior investment vehicles.
Nations® option enhanced strategies take advantage of the unique synergy that results from the combinations of underlying asset portfolios and covered options. The heart of that synergy includes:
Diversification – Diversification is achieved through the negative correlation to the underlying asset portfolio fo the option portfolio.
Option Price Premium – Over time, the prices received by option sellers (implied volatility) is greater than the subsequent value of those options (realized volatility). This phenomenon exists for several reasons including the demand for protective options from hedgers and the asymmetrical nature of returns for option sellers.
Volatility Skew – Some options are consistently more expensive than other options. Nations Indexes take advantage of this skew by selling options that are more expensive and buying options that are less expensive.
Option Quantity Modulation – Nations strategies objectively modulate the number of options sold in order to sell more options when options are expensive and to sell fewer options when options are less expensive.
