Summary
- Market history demonstrates that while equity markets trend higher over time, downside volatility remains a persistent risk, especially during periods of economic uncertainty.
- Financial advisors seeking to optimize portfolio risk-adjusted returns often rely on broad-based U.S. large-cap equity allocations. While this provides significant growth potential, it also exposes investors to full downside risk during periods of market turbulence.
- Traditional hedging approaches, such as reducing equity allocations or defined outcome strategies that sell covered calls, often limit upside participation or introduce timing complexities. A more efficient solution lies in hedged equity strategies that maintain full upside participation while mitigating downside risk through a structured put option overlay.
- By systematically purchasing laddered, out-of-the-money put options, investors can establish a cost-effective hedge against significant market declines without capping equity gains. This disciplined approach, implemented in a systematic manner, is available through the Overlay Shares Hedged Large Cap Equity ETF (OVLH).
By Shawn Gibson
Rethinking Traditional Equity Exposure
Financial advisors seeking to optimize portfolio risk-adjusted returns often rely on broad-based U.S. large-cap equity allocations. While this provides significant growth potential, it also exposes investors to full downside risk during periods of market
Since 2013, Liquid Strategies has been applying a layer of index option investing to traditional bond and stock portfolios, creating practical solutions for managing clients’ cash flow and growth objectives. Overlay Shares eliminates past inhibitors of overlay adoption to make this strategy available to a broader investment community.
Read the full article here
