ARA offers broad based, sector, issuer hedging and stock replacement strategies for investors seeking downside protection while retaining upside return potential.
PROCESS
- Analyze current portfolio positions
- Measure each asset’s current and expected absolute and relative volatility level
- Determine the performance impact of the insurance premiums versus volatility harvesting
- Buy protection or replace the asset with a synthetic exposure
- Monitor and reconsider as markets, tax rules, and client views change
- Add downside protection to all or specified positons by purchasing put options
- Finance insurance by selling options
- Dynamically manage options with changes in volatility, price and time
Static Hedge
A Static Hedge may be priced as a zero premium where the premium received from selling a call option offsets the premium paid to purchase a put option. Your gain and loss thresholds are predetermined over the investment horizon.
Dynamic Hedge
A Dynamic Hedge may use different expiration dates and generate either cash inflow or more typically cash outflow to the account. A Dynamic Collar allows the investor the opportunity to out perform the Static Collar under certain conditions. Your participation rate and risk level will “float” with market conditions and pricing levels.
