IRON’s depth of equity options expertise stems from our deep quantitative research skills, practical trading experience in the equities and options markets, and advanced research and portfolio management techniques.
Our approach is designed to deliver attractive risk-adjusted net returns relative to alternative sources of equity market exposure.
IRON Global Equity Plus Strategy
Options-Enhanced Global Equity Strategy (Global Equity Plus Strategy)
Investment Objective
The objective of IRON’s Global Equity Plus Strategy is to provide superior risk-adjusted total returns relative to the MSCI All Country World Index by utilizing an actively managed options overlay strategy on the underlying exchange traded index funds.
Investment Philosophy
IRON’s investment philosophy stems from the belief that one can enhance the returns of a broad global market index by opportunistically writing and actively managing options on the underlying four exchange traded index funds. We believe most option overlay strategies do not fully utilize the driver of performance, the underlying securities, and therefore at times unnecessarily write options, thus capping the upside performance.
Investment Methodology
Selecting and Writing Options
Our proprietary model takes into account many factors including, but not limited to, the option premium, delta, tenor, and volatility (both implied and realized). With these inputs determined, the portfolio manager will decide which option, if any, should be written on the underlying four exchange traded funds. IRON has determined through its proprietary research that it may be more advantageous not to write options on the underlying positions to achieve its maximum upside potential during certain market cycles.
Roll Strategies
The strategy actively manages written call positions through the use of IRON’s proprietary roll strategies. During the course of a written option position, the portfolio manager will decide whether to let the option expire, close out the option when an optimal amount of premium can be realized or cover the option to realize upside appreciation of the underlying.
Risk Management
Our proprietary option overlay methodology limits option moneyness when the underlying trades above the strike price or the option trades “in the money”. This limits the price paid to close the option position and also allows the underlying to participate in capital appreciation to a greater extent, particularly in rising market conditions. By utilizing effective risk management practices, we believe we can enhance the risk-adjusted total return of the portfolio relative to its benchmark.
IRON S&P 500 Equity Plus Strategy
Options-Enhanced US Equity Strategy (S&P 500 Equity Plus Strategy)
Investment Objective
The objective of IRON’s S&P 500™ Equity Plus Strategy is to provide superior risk-adjusted total returns relative to the CBOE S&P 500® Buy-Write Index (BXMSM) by utilizing an actively managed options overlay strategy on the underlying exchange traded index fund.
Investment Philosophy
IRON’s investment philosophy stems from the belief that one can enhance the returns of a broad index portfolio by opportunistically writing and actively managing options on the underlying securities. We believe most option overlay strategies do not fully utilize the driver of performance, the underlying securities, and therefore at times unnecessarily write options on the underlying, thus capping the upside performance.
We believe the strategy’s options decision making process and active management of written options enables the underlying equity portfolio to capture a higher percentage of the upside in stronger market environments while opportunistically collecting option premiums in other market conditions, relative to its Benchmark, over full market cycles
Investment Methodology
Selecting and Writing Options
The strategy utilizes a systematic approach in selecting options with appropriate times to expiration and probability of the option being called away. The number of option positions may correspond to a fully covered underlying position; the strategy makes no attempt to utilize additional leverage through the number of option contracts written.
Roll Strategies
The strategy actively manages written call positions through use of IRON’s proprietary roll strategies. Option positions may be closed-out prior to expiration, or written for a shorter time period based on a number of indicators such as implied volatility, underlying stock movement, pre-determined threshold of probability of option being called, realized option premium and the absolute level of option price.
Risk Management
Option writing may limit the amount of capital appreciation, especially in a rapidly rising stock market. The short-term return profile might be unattractive, hence this strategy is not suitable for shorter-term investment horizons.