News category: North America

Investors concerned over the utility and cost of index hedging strategies should avoid index volatility strategies and instead look to long dated calls or call spreads on gold, or puts concentrated on artificial intelligence names, said Cem Karsan, founder and senior managing partner of Kai Volatility Advisors in Chicago.

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Institutional investors in the U.S. and Europe, namely hedge funds and asset managers, are entering futures contracts on the Nifty 50 index as a way to add alpha and rebalance their portfolios.

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Some U.S. equity market records were broken this week but not the type that would draw any applause in the middle of an election year. The Nasdaq had its worst day since 2022 on Wednesday with the major tech rout wiping out USD1 trillion from the composite index.

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Nasdaq has seen an increase in institutional investors using Nasdaq-100 index options as a means to manage macro risks for almost all large-scale market events. John Black, head of index options at Nasdaq, said retail investors have also contributed to this volume, implementing styles and strategies similar to institutional players.

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Demand for low volatility equity exposure is pushing investors toward active exchange-traded funds that use options. Market choppiness in the last few years, and a movement away from mega cap growth and thematic ETFs, have added to the demand for more innovative product development in the ETF industry.

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USD2.1 billion San Francisco-based manager QVR Advisors said hedged equity investors are facing structural pressures in the options market. Scott Maidel, head of the hedge fund business at QVR, said that the massive trade flow in hedged equity strategies, supported by hundreds of billions in assets under management growth, is contributing to a large and still growing structural dislocation in options markets.

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Uncertainty around the U.S. presidential election is ushering in opportunities to play relative value volatility strategies between Europe and the U.S. Simon Aninat, senior portfolio manager for volatility and overlay strategies at EUR382 billion Ostrum Asset Management, said implementations could include…

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Investors are pouring record amounts into exchange-traded funds, but calling them a purely passive investment option is no longer cool (or accurate). Options-based ETFs have been making plenty of headlines lately and a debate about whether the market can handle the insatiable appetite for them made for an interesting discussion at Global EQD in May.

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Long rates volatility strategies and defensive implementations of equity dispersion are gaining traction as investors seek cost-efficient protection and diversification in uncertain markets. Guillaume Flamarion, managing director, co-head of the multi-asset group and head of equity derivatives structuring at Citi in New York, said an important task for the bank has been to provide its clients hedging solutions with improved carry costs.

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Investors are increasingly concerned about volatility with high interest rates, inflation, geopolitical tensions and more than half the world headed to the polling booth. For asset owners and asset managers, this shifting landscape is causing a fog of uncertainty or as AP3’s head of strategic asset allocation said, investors are hiking in the mist.

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