The Metamorphosis of the Butterfly & Why Volos' Optimized Butterfly Index is a Next-Generation Volatility Strategy
We recently launched the Volos Optimized SPY & TLT Butterflies Index (VOSTB) in partnership with a family office to provide high-net worth individuals a strategy that produces high absolute returns from a US equity & fixed income exposure with a fixed-downside risk.
The index tracks a modified put spread butterfly strategy on SPY & TLT and follows a 3 by 4 by 1 pattern (buying 3 out-of-the-money puts, writing 4 at-the-money puts, and buying 1 in-the-money put) versus a more traditional 1 by 2 by 1 approach in order to generate higher returns from the upward bias of the market in exchange for higher downside risk. In order to mitigate the increased risk, VOSTB utilizes optimization technology to tighten the spreads when volatility increases.
VOSTB Generates Performance When Your Portfolio Lags
VOSTB has performed incredibly well with the index increasing 36.2% in 2020. Despite inflation fears creating a difficult environment for fixed income (TLT currently down over 12% YTD), VOSTB is up slightly on the year at ~.6% and produced 7%+ returns in April as SPY & TLT traded sideways. Here are some other high level VOSTB highlights:
As of May 11th, VOSTB has achieved annualized returns of 19.5% since it's June 2014 inception with ~15% volatility (versus the SPY's ~18%).
VOSTB has never suffered a drawdown greater than 17%. During the COVID correction, the index appreciated returning 4.9% and 4.4% in February and March respectively.
VOSTB consistently produces positive returns. Since inception, it has produced positive returns in 68% of all months. In 20% of the months, VOSTB produced greater than a 5% return (compared to 10% of months where VOSTB returns were less than -5%).
VOSTB can be fully funded through margin on an existing long only portfolio and provide uncorrelated returns to the market.
Available for Direct License
The Volos Optimized SPY & TLT Butterflies Index is available for direct license. To view index details, please visit the VOSTB profile.
For licensing details on VOSTB or additional information, please reach out to jeff.corrado@volossoftware.com or wr@wraquet.com.
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.
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