Volos Indexes for Hedging Equity Tail Risk

Introducing options-strategy indexes for tail hedging, designed to serve as a potential overlay for efficient equity downside protection. 

Robust, Defined-Risk Hedging

This strategy was constructed using both SPX and VIX options in order to target returns in both down-trend markets with stable volatility (such as Q4, 2018) and tail events with elevated volatility (such as March, 2020).

Primary Index Rules

Consists of two hedge positions:

• SPX Put Spreads

  • 25 & 15 delta

  • 75% of Hedge Notional

• VIX 1x2 Call Ratio Spreads

  • 50 & 35 delta

  • 25% of Hedge Notional

Positions are entered with two months to maturity and rolled after one month. Hedge notional is equal to 30% of NAV. 

Targeting High Convexity & Low Cost of Carry

SPX Long Put Spreads and VIX Short Ratio Call spreads provide (1) positive convexity, (2) defined risk, and (3) asymmetric short beta exposure.

Access

Clients can directly access data & documentation on this strategy through the Volos Index Platform, which provides unprecedented analysis and transparency on options-based Indexes. 

About Volos

Volos provides financial Indexes and technology for institutional investors.

We specialize in indexes for options and derivatives strategies, providing transparency to this traditionally opaque asset class.

For additional information on Index licensing and services, please contact licensing@volossoftware.com. 

Disclaimer:

Any Indexes described herein are designed to represent a systematic rules-based options strategy. In the construction of the Indexes there are certain assumptions, in respect of the financial instruments referenced either directly or indirectly in the Indexes, regarding liquidity, transaction costs, margin requirements, taxes, the ability for transactions to be executed at specific times. However, there is no guarantee that market participants trying to replicate the Index or strategy based on the Index will be able to execute all of the required transactions to replicate the Index or strategy. Actual transaction costs could be significantly higher than transaction costs used in the calculation of the Indexes.

This information is provided for general education and information purposes only. No statement should be construed as a recommendation to buy or sell a security or to provide investment advice. The Indexes and all other information provided by Volos and its affiliates and their respective directors, officers, employees, agents, representatives and any third party providers of information (the Parties) in connection with the Indexes (collectively Data) are presented "as is" and without representations or warranties of any kind. The Parties are not be liable for loss or damage, direct, indirect or consequential, arising from any use of the Data or action taken in reliance upon the Data. Investors should consult their tax advisor as to how taxes affect the outcome of contemplated options transactions.

Past performance may not be indicative future returns. The timeseries of the Indexes contain back-tested data, prior to when the Indexes were launched. Back-tested performance information is purely hypothetical and is provided in this document solely for information purposes. Back-tested performance does not represent actual performance and should not be interpreted as an indication of actual performance.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options, also known as the options disclosure document (ODD). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606.

Neither Volos Portfolio Solutions LLC (Volos) nor any of its principals, directors, employees or representatives is providing you any investment advice through your use of our website or our software. Volos is not an investment adviser, and is not registered with the Securities and Exchange Commission or any state regulator, and by using this Index you will not be an advisory client of, or otherwise have an advisory relationship with Volos. Volos does not endorse or recommend the purchase or sale of any securities. You are responsible for all aspects of your use of the Index including any decisions about whether to buy or sell securities as a result of using the Index. Volos is not a registered broker-dealer and is not regulated by the Financial Industry Regulatory Association (FINRA). Securities trading, including options trading, entails significant risk and is not appropriate for all investors. Certain complex options strategies carry additional risk. Investments in securities involve the risk of loss, including total loss of an investment.