qms advisors - option strategist - eurostoxx 50 (sx5e index)
DESCRIPTION
Structured Products StrategistOptimal Non-Linear Portfolio Solutions QMS Advisors brings investors a complete suite of cutting-edge tools, insightful daily reports and customized in-depth analyzes to assess your option-based strategies and screen the most appropriate assets. Implied Volatility Surfaces, Dividend Yields and Last Prices•This service provides end-of-day information on any equity underlying (single equity names and equity indices) - such as any underlyings' price, annualized dividend yield estimates, and parametric implied volatility surface by terms (whether in a "raw" fomat or conveniently synthesized in a polynomial form by terms). Additionally, our daily reports can be fine-tuned to our investors needs, and also includes options volume and open interest along with ATM contracts, all associated greek calculations (delta, gamma, vega, rho, etc), correlations to any other assets, and more on demand. Free daily basic reports are available below. Options Calculator •Our Options Calculator brings you features that were previously available only for professionals. Utilize QMS Advisors real end-of-day market data, or customize all input parameters to price any option style.•Our analyzes and calculators utilize real end-of-day market data (both market prices and fundamental information) which can save you a lot of time looking and calculating the correct initial information required to calculate fair option prices or implied volatilities. Additional data such as historical volatility, implied volatility for all options strikes and greeks, and time and volatility skew charts for all maturities are also available on demand. Contact us at [email protected] for additional information. Option Strategist •QMS Advisors' Option Strategist helps you find the best opportunities among Covered Calls and Naked Puts on a historical basis. Our systems help you single-out assets that have been the most relutive to specific options-based strategies and define the associated optimal strike levels and exercise probability. Our systems further calculate and graph performance and risk parameters on a stand-alone and total portfolio basis. •Alternatively, our investors can formulate their desired expected payoffs, exercise probabilities, risk parameters, expirations, etc. and obtain fully customized systematic option strategies.•Our reports include charting of historical information such as Implied and Realized Volatility, Correlation and Beta, Skew & Kurtosis, that help better visualize specific strategies' historical performance and stastistical parameters. This multiple charts approach allows investors to better determine interrelations between different indicators visually.Volatility Relative-Value Analyzer•Our Volatility Relative-Value Analyzer service helps you formulate trading ideas for overbought/oversold options and find appropriate options-based strategies. The system finds equities that have been impacted by changes in volatility and identifies those with the greatest increases or decreases in volatility. •Our Volatility Relative-Value Analyzer tool can further be used to build a stock spread, strangle, or basically, any two-leg option strategy with one underlying. Scan for trading opportunities using criteria based on price and implied volatility and on specific indicators like Call/Put volume and Relative volatility. Contact us at [email protected] and start getting a true market edge using these services now.TRANSCRIPT
Option StrategistCovered Call StrategyEuro Stoxx 50 Index
This material does not constitute investment advice and sho uld not be viewed asa current or past recommendation or a solicitation of an offe r to buy or sell anysecurities or to adopt any investment strategy.
Q.M.S Advisorstel: 078 922 08 77
e-mail: [email protected]
website: www.qmsadv.com
February 2012
� Asset Management: � A highly competitive landscape anchored in the Mean-Variance space.
Enhancing Long-Term Portfolio Performance while Diminishing Risks in the Mean-Variance SpaceGOAL
Option StrategistCovered Call Strategy
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 1
� A highly competitive landscape anchored in the Mean-Variance space.
� Monetizing Volatility� Significant potential enhancement of performance
• Increased potential underlying asset’s returns via volatility monetization
• Reduced risks in the mean-variance space
� Transparent, flexible and actionable strategies:� Systematic management:
• “Passive” investment strategy that requires no investment timing decision.
� Allocation decision:
• Overlays: solutions with minimal impact on a strategic asset allocation.
• Dedicated allocation: Certificates, Structured Products, etc…
Option Strategist Covered Call Strategy
Euro Stoxx 50 Pr
ESTX 50 € NRt
Euro Stoxx 50 Pr Ex-Div
Covered Call Strategy: 2.5% OTM
Euro Stoxx 50 Pr Ex-Div &
Covered Call Strategy: 2.5% OTM
Covered Call Strategy: 5%
OTM
Euro Stoxx 50 Pr Ex-Div &
Covered Call Strategy: 5%
OTM
Rendement Historique -9.57% -6.76% -9.57% 18.31% 6.99% 17.19% 5.98%
Volatilité Historique 26.05% 26.03% 26.05% 11.23% 23.40% 8.53% 24.05%
Option Strategist- Covered Call: Based on Historical Data from Jan 16th 2006 to Jan 31st 2012
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 2
Attractive historical statistical features
� Each strategy offers attractive statistical features whether considered on a standalone or
total portfolio basis, and this despite the extreme market environment considered in our
analysis.
Source: Bloomberg, QMS Advisors
Volatilité Historique 26.05% 26.03% 26.05% 11.23% 23.40% 8.53% 24.05%
Rendement/Risque -0.37 -0.26 -0.37 1.63 0.30 2.01 0.25
Skewness Historique 0.06 0.06 0.06 -3.19 0.49 -4.11 0.38
Kurtosis Historique 5.56 5.58 5.56 58.61 15.04 85.73 11.27
Maximum Drawdown -64.1% -62.5% -64.1% -23.1% -37.3% -16.0% -40.1%
Tracking Error au SX5T Index 0.63% 0.00% 0.63% 32.64% 11.34% 30.44% 8.64%
Correlation au SX5T Index 100.0% 100.0% 100.0% -44.7% 90.0% -39.6% 94.4%
Beta au SX5T Index 1.000 1.000 1.000 -0.193 0.809 -0.130 0.872
Option Strategist Historical Efficient Frontier
Based on Historical Data from Jan 16st 2006 to Jan 31st 2012
10%
15%
20%
His
toric
al R
etur
n (in
% p
.a.)
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 3
-15%
-10%
-5%
0%
5%
0% 5% 10% 15% 20% 25% 30%
Historical Volatility (in % p.a.)
His
toric
al R
etur
n (in
% p
.a.)
ESTX 50 € NRt Euro Stoxx 50 PrEuro Stoxx 50 Pr Ex-Div Covered Call Strategy: 5% OTMEuro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM
� Options offer portfolio managers unrivaled tools to enhance their
performance and to better manage their risk exposures
Multiple passive option-based investment strategies have offered and offer more
Option Strategist Covered Call Strategy
In a historical mean-variance context, this strategies offers significantly higher Sharpe ratios
RATIONALE
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 4
� Multiple passive option-based investment strategies have offered and offer more
attractive return and risk profiles in a mean-variance context than traditional
passive investment strategies on similar underlying assets.
• Covered call strategies consist in systematically selling one-month out of the
money calls and rolling those positions at expiry. This systematic approach
does not require any decisions in terms of market timing.
� Covered Call strategies offer attractive payoff profiles:
• Historically offered higher investment performance
• Display asymmetric payoff profiles
• Offer lower variance and drawdown risks
� Though passive and implemented in a mechanical manner, this strategy
dominates the efficient frontier on a historical basis.
Option Strategist Performance
Based on Historical Data from Jan 16st 2006 to Jan 31st 2012
250
300
350
Gro
wth
of E
UR
100
.-
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 5
0
50
100
150
200
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
Apr
-10
Jul-1
0
Oct
-10
Jan-
11
Apr
-11
Jul-1
1
Oct
-11
Jan-
12
Gro
wth
of E
UR
100
.-
ESTX 50 € NRt Euro Stoxx 50 Pr
Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM Covered Call Strategy: 5% OTM
Option Strategist Reduced Drawdown Risks
Based on Historical Data from Jan 16st 2006 to Jan 31st 2012
-20%
-10%
0%
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
Apr
-10
Jul-1
0
Oct
-10
Jan-
11
Apr
-11
Jul-1
1
Oct
-11
Jan-
12
His
toric
al D
raw
dow
ns (
in %
)
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 6
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
His
toric
al D
raw
dow
ns (
in %
)
Maximum Drawdown Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM Ex-DividendsMaximum Drawdown ESTX 50 € NRtMaximum Drawdown Euro Stoxx 50 Pr Ex-Div Ex-DividendsMaximum Drawdown Covered Call Strategy: 5% OTM Ex-Dividends
Option Strategist Relative Risks and Tracking Error of the Strategy
Based on Historical Data from Jan 16st 2006 to Jan 31st 2012
60%
70%
80%
90%
100%
His
toric
al 3
0-D
ay V
olat
ility
and
Tra
ckin
g E
rror
(in
%)
60%
70%
80%
90%
100%
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 7
0%
10%
20%
30%
40%
50%
60%
Jan-
06
Apr
-06
Jul-0
6
Oct
-06
Jan-
07
Apr
-07
Jul-0
7
Oct
-07
Jan-
08
Apr
-08
Jul-0
8
Oct
-08
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
Apr
-10
Jul-1
0
Oct
-10
Jan-
11
Apr
-11
Jul-1
1
Oct
-11
Jan-
12
His
toric
al 3
0-D
ay V
olat
ility
and
Tra
ckin
g E
rror
(in
%)
0%
10%
20%
30%
40%
50%
60%
30-Day Historical Volatility Euro Stoxx 50 Pr30-Day Historical Volatility Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM30-Day Tracking Error btw Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM to Euro Stoxx 50 Pr30-Day ATM Implied Volatility - Euro Stoxx 50 Pr Ex-Div
Option Strategist Relative Daily Distribution of Returns to the Benchmark
Based on Historical Data from Jan 16st 2006 to Jan 31st 2012
y = -0.1328x + 0.0007R2 = 0.1557
2%
4%
6%
8%
10%
Dai
ly R
etur
ns -
Sys
tem
atic
Sal
e of
1-M
onth
10
5% C
alls
(in
%)
2%
4%
6%
8%
10%
Dai
ly R
etur
ns -
Eur
osto
xx 5
0 E
x-D
ivs
and
Cov
ered
Cal
l Str
ateg
y (in
%)
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 8
Attractive historical performance� Covered call strategies introduce minimal tracking error to the underlying security� Daily returns generated by the short call position have almost systematically been
negatively correlated returns to the underlying’s returns
-10%
-8%
-6%
-4%
-2%
0%
2%
-10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10%
Daily Returns - Eurostoxx 50 Ex-Divs (in %)
Dai
ly R
etur
ns -
Sys
tem
atic
Sal
e of
1-M
onth
10
5% C
alls
(in
%)
Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM
y = 0.8687x + 0.0007R2 = 0.8845
-10%
-8%
-6%
-4%
-2%
0%
2%
-10% -5% 0% 5% 10%
Daily Returns - Eurostoxx 50 Ex-Divs (in %)
Dai
ly R
etur
ns -
Eur
osto
xx 5
0 E
x-D
ivs
and
Cov
ered
Cal
l Str
ateg
y (in
%)
Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM
Option Strategist Comparative Distribution of Returns to the Benchmark
0%
5%
10%
15%
20%
25%
30%
PD
F: P
roba
bilit
y D
ist.
Fun
ctio
n (%
)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
CD
F: C
umul
ativ
e P
roba
bilit
y D
ist.
Fun
ctio
n (%
)
0%
5%
10%
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30%
PD
F: P
roba
bilit
y D
ist.
Fun
ctio
n (%
)
0%
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100%
CD
F: C
umul
ativ
e P
rob
abili
ty D
ist.
Fu
nctio
n
(%)
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 9
0%
-6.0
%
-5.0
%
-4.0
%
-3.0
%
-2.0
%
-1.0
%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0%
Proba. Dist. F(). ESTX 50 € NRt Proba. Dist. F(). Euro Stoxx 50 Pr
Cumul. Dist. F(). ESTX 50 € NRt Cumul. Dist. F(). Euro Stoxx 50 Pr
0%
-6.0
%
-5.0
%
-4.0
%
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%
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%
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%
0.0
%
1.0
%
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%
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%
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%
5.0
%
PD
F: P
roba
bilit
y D
ist.
Fun
ctio
n (%
)
0%
CD
F: C
umul
ativ
e P
rob
abili
ty D
ist.
Fu
nctio
n
Proba. Dist. F(). ESTX 50 € NRt Proba. Dist. F(). Euro Stoxx 50 Pr
Cumul. Dist. F(). ESTX 50 € NRt Cumul. Dist. F(). Euro Stoxx 50 Pr
0%
10%
20%
30%
40%
50%
60%
70%
-6.0
%
-5.0
%
-4.0
%
-3.0
%
-2.0
%
-1.0
%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
PD
F: P
rob
abili
ty D
ist.
Fu
nctio
n
(%)
0%
10%20%
30%
40%
50%60%
70%
80%90%
100%
CD
F: C
umul
ativ
e P
rob
abili
ty
Dis
t. F
unc
tion
(%
)
Proba. Dist. F(). ESTX 50 € NRtProba. Dist. F(). Covered Call Strategy: 5% OTMCumul. Dist. F(). ESTX 50 € NRtCumul. Dist. F(). Covered Call Strategy: 5% OTM
0%
5%
10%
15%
20%
25%
30%
-6.0
%
-5.0
%
-4.0
%
-3.0
%
-2.0
%
-1.0
%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
PD
F:
Pro
babi
lity
Dis
t. F
unct
ion
(%)
0%
10%20%
30%
40%
50%60%
70%
80%90%
100%
CD
F:
Cum
ulat
ive
Pro
babi
lity
Dis
t.
Fun
ctio
n (%
)
Proba. Dist. F(). ESTX 50 € NRtProba. Dist. F(). Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTMCumul. Dist. F(). ESTX 50 € NRtCumul. Dist. F(). Euro Stoxx 50 Pr Ex-Div & Covered Call Strategy: 5% OTM
� Covered Call Strategies offer a simple, transparent and liquid alternative to tap the most recognized and documente d source of alpha:
� Covered call strategies are an easy and efficient way to monetize volatility: an approach that offers mechanical investment protocols with clear statistical return characteristics, and attractive historical
Option Strategist Simple and Transparent Approach to Tap Alpha Sources
Q.M.S Advisors | tel: +41 (0)78 922 08 77 | e-mail: [email protected] | website: www.qmsadv.comPage 10
with clear statistical return characteristics, and attractive historical track-records.
� Historically, the strategy has produced significantly higher returns with lower realized volatility when compared to the underlying security, resulting in attractive Sharpe ratios.
� Covered Call strategies are structurally short volatility strategies that allows investors to exploit one of the very few sources of academically recognized and widely documented market inefficiency, that is the non-convergence between implied and realized historical volatilities.