Enhancing returns during volatile times
Ben Streater on 09 Sep 2020
Like me, you were probably alerted to the VIX movement this week as market volatility spiked in the USA, linked to the correction in technology stocks. It seems the only certainty this year is continued volatility but our sophisticated wholesale clients are not alarmed, but rather are opportunistic.
At Stropro we provide our clients with various investment opportunities to navigate volatility and generate enhanced returns. Since launching last year our clients have navigated the COVID19 turmoil using structured products to enhance income and outperform most traditional investments. As an investor, you might be concerned by recent market volatility so I want to outline a few strategies we are deploying including a current investment opportunity with capital preservation features expected to deliver 14.3% p.a.
The Business Insider recently quoted the Chief Investment Officer for UBS Global Wealth Management, Mark Haefele, who recommended “making use of structured investments to add asymmetric exposure to stocks, e.g., with a degree of capital protection.” At Stropro we provide a diverse range of structured products.
Heightened volatility presents opportunities for sophisticated investors. You may be familiar with the concept of “selling volatility”. During times of market disruption, investors can capitalise using various complex derivative strategies. We make this simpler by embedding the strategy into elegant products listed on the Stropro platform.
Technically, volatility is a statistical measure of the dispersion of returns for a given security or market index. In simple terms, volatility measures how much prices are moving around. In stable markets volatility is low, but this year volatility has spiked. A recognised measure of volatility is the VIX index which has recently hit a one-month high.
Source: Bloomberg extracted on 9 September 2020
The structured product I’d like to explore in more detail tracks the performance of an underlying basket of shares. The return is an accumulated 14.3% p.a. (or a potential cumulative return of 42.9% after 3 years). For this product, the basket of shares are large-cap US technology stocks (Apple, Google, Microsoft, Facebook). We are taking advantage of the current volatility in these correlated stocks. Your return and capital is secure as long as none of the four underlying stocks fall by 35% or more from their current levels at maturity.
This strategy is “selling volatility” conveniently compiled into an investment product for our investors. For more information reach out to the Stropro team or please register a profile with Stropro.
Ben Streater is the Chief Product Officer at Stropro. This article is for educational purposes and is not a substitute for professional and tailored financial advice. This article expresses the views of the authors at a point in time, which may change in the future with no obligation on Stropro or the author to publicly update these views.