Our Strategies: How we turn Volatility into Opportunity
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Volatility Index Premium
The Volatility Index Premium (VIP) strategy is an option overlay designed to generate consistent income while maintaining exposure to the performance of a client’s underlying portfolio. The goal is to harvest the volatility risk premium consistently over a long-term horizon through short-term option selling. The strategy targets 3-4.5% annualized cash flow from option premiums, though this may vary with market conditions.​
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VIP can be applied to marginable accounts holding:
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Diversified portfolios of stocks and bonds
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Concentrated stock positions
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Bond holdings
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ETFs and mutual funds
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Cash flow is generated by selling bull put credit spreads on a broad-based equity index such as the Nasdaq-100 or S&P 500, using the underlying portfolio as collateral. Because VIP is deployed in an SMA wrapper, clients and advisors retain:
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Full transparency
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Liquidity
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Tax loss harvesting potential
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AUM-based fees are charged quarterly in advance and range from 30-50 basis points, depending on account size and complexity. This fee is based solely on the account value used for the overlay and excludes any advisory fees charged by the primary advisor.​​
Six Features of the VIP Strategy
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Provides potential for higher income or return in addition to the performance of existing holdings
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Tranche-based approach- index exposure is typically divided into three tranches,with laddered expirations to maintain a steady monthly trade cadence
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Active management- positions are monitored and may be adjusted to manage risk or capture volatility opportunities
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Cash flow flexibility- premiums can be used for client distributions, reinvestment, or to offset management fees
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Adaptive exposure- as existing exposure rolls off, new spreads are established, allowing scaling up or down based on market conditions
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Potential tax advantages- where applicable, Section 1256 index contracts allow for blended 60/40 long-term/ short-term tax treatment
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Our goal is to provide a comprehensive suite of tools to help you navigate volatility with confidence, so please check back soon to access the latest strategies as they become available.