Atlanta based, state registered investment advisor focused on providing sub-advisory money management. We focus on systematic derivative trading strategies designed to provide total return and risk mitigation. All model are rules-based and mathematical.
Our lead strategy, Implied Velocity, seeks to provide incremental income through a rules-based, mathematical process of selling dynamically positioned index-based call and puts spreads. Requires no initial client funding- client posts collateral/marginable assets and cash to cover any losing trades.
Attractive feature include:
- Requires no initial funding. Client posts collateral/marginable asset(s) to cover maximum loss potential required by broker and cash to settle any losing trades.
- Returns independent of beta source.
- Strategy can be implemented over any marginable asset(s) and does not alter current holdings or allocation.
- Favorable tax treatment: Section 1256 IRS tax deduction
- Spread trading allows for custom maximum-risk-budget
Strategy seeks to exploit derivative pricing inefficacies that are existent and persistent. Implied volatility has exceeded historical volatility 88.87%* of the time, creating an attractive scenario for selling excess volatility within the options markets.
The strategy is designed to receive a premium from the option buyer by writing a sequence of weekly, out-of-the-money (OTM), index-based call and put spreads. Typically, two-week, Out-of-the-money (OTM) put and call spreads are written against the S&P 500® index (SPXW). Upon expiration, if the value of the S&P 500® Index settles beyond the SPXW strike price, the option finishes in-the-money (ITM) and the client has the obligation to pay the buyer the difference between the strike price and the value of the S&P 500® Index.
Implied volatility reflects investor expectations of the market experiencing changes in value over time and is a key impute for valuing options. As implied volatility is rising, generally there is a devaluation in the broad index for stocks, as captured by the S&P 500®. The historically negative correlation between S&P 500® index valuations and rising levels of implied volatility is tracked by the Volatility Index® (VIX). The VIX can be read as the expected range of movement in the S&P 500® index over the next year, at a 68% confidence interval.