Option strategy
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Our team has a cumulative experience of more than 60 years of experience in the financial markets and we have developed different strategies using derivatives for more than 10 years based on extensive research. We have developed several in-house indicators to assess financial markets which include both fundamental as technical factors as well as technical analysis. The option strategies make use of the fractal theory (Mandelbrot) and behavioral finance.
We relentlessly continue to assess financial markets and search for option strategies that improve performances. This is why we consider this also our financial R&D lab which improves our global portfolio management as Invest4Growth Asset Management Ltd. uses this in-house R&D to tackle the financial challenges that the world encounters in this New Normal Era after the financial crisis of 2007-2008.
Advantages of our option strategies & derivatives :
- Development of several models that help assess market conditions (Drawdown-model, Rally From Bottom model, Risk on – Risk off model, etc.)
- Active Portfolio Management
- Active Risk Management
- Transparency
- Supporting our partners in developing alternative strategies
Investment objective
This strategy pursues sustainable growth of the portfolio. Rigorous risk management is used to achieve this objective. As a result, this strategy aims to generate positive returns in all market conditions over a two-year time horizon.
This strategy is suitable for investors who seek growth in their assets, but subject to respecting a specific and predetermined risk budget on a monthly basis. The use of such a monthly risk budget allows one to invest with the necessary peace of mind while ensuring that the strategy works efficiently in all market conditions. The strategy is therefore designed to deal appropriately with the unpredictable behavior of the markets and thanks to its short-term safety net, it can exploit opportunities when fractal movements occur in the financial markets.
Management team
The option strategy is managed by Sam Safavi, co-founder of Invest4Growth Asset Management Ltd.
Investment Strategy
This option strategy targets an annual return around 5% while offering short-term protection because it works with a limited risk budget of 5% per month. This provides a safety net in the event of an unexpected downturn in the financial markets.
Specifically, this strategy aims to achieve a return equivalent to that of the stock markets over the long term with a limited time horizon while avoiding permanent losses, by which we mean losses that cannot be recouped within a relatively limited period.
Operation of the strategy:
- The strategy is applied only to equity indices
- Monthly risk budget of max. 5%.
- The operation is similar to that of an insurer who collects insurance premiums on a regular basis and reinsures with a reinsurer. The strategy is therefore to sell financial insurances (both to cover market falls and rises) to other investors and then to partially cover the sold insurances in the portfolio by buying insurances yourself.
- Thanks to the use of a monthly risk budget, there is always sufficient liquidity to opportunistically build new positions (e.g. buy after a fall or sell after a rise).
- The portfolio is always protected against exceptional events that could have a significant impact on the financial markets.
Investment Strategy
In all market conditions, an attractive combination of return and safety is sought, even in the case of fractal movements in the financial markets (“Black Swans” (*)).
Classic portfolio management relies on diversification across different asset classes, such as stocks, bonds, commodities, currencies, etc. Diversification also aims to reduce the overall risk of the portfolio, knowing that the different asset classes are inherently uncorrelated. However, the correlation between asset classes is variable and diversification does not always lead to a reduction in risk when a major financial crisis occurs that may cause a simultaneous decline in stock markets, bond markets and commodities.
In addition, traditional asset management faces the difficulty of having to predict the future in one way or another by determining the weighting of asset classes. In essence, therefore, it is almost impossible to determine the true degree of risk from the risk to which one is exposed. In summary:
- The options strategy offers an alternative to traditional portfolio management in that management is based on the application of a reactive methodology rather than relying on forecasts and market timing
- The methodology is independent of economic forecasts (as opposed to traditional management)
- The risk on a monthly basis is measurable with 100% certainty
- Risk budget of 5% per month
- Strategy in options on equity indices
- Contrarian approach in management (to be able to buy systematically after a fall)
- Absence of so-called permanent losses
- Strategy of "net" sale of options to collect premiums (like an insurance company)
- Options provide access to a new, highly profitable asset class, time value (which is built into the options)
(*) Black Swan: extreme event, the cost of which may be very high (major impact on financial markets) but the probability of which is very low