Short Volatility Strategy
The volatility risk premium is a well established and systematic risk premium.
Investments in this alternative risk premium represent an attractive building block for a balanced portfolio and reduce dependence on economic developments.
Global approach, which captures the volatility risk premium in multi assets
Using a systematic option strategy, it can be tapped globally in the asset classes equities, bonds and currencies. Our aim is to position the volatility strategy on a broad basis.This is a key distinguishing feature and offers investors attractive opportunities for diversifying returns and risk in the portfolio context.
Strategically, investments can be made in twelve underlying instruments in the asset classes equities, bonds and currencies. Tactically, we invest in such a way that we can dynamically exploit the short-term attractiveness of the individual volatility markets. Diversification and disciplined risk management are integral success factors here.
Risk management as an integral part of the investment process
New options are always concluded in the context of the risk profile of the existing portfolio. 7orca diversifies across underlying assets and asset classes, terms and market levels. Each new option contract implies that the overall risk of the fund can be changed and managed. Our motto is always: “Limit risk, seize opportunities”. This balance in the investment process is crucial for rapidly making up for loss phases.
In the event of increased risk exposure, 7orca intervenes in the existing portfolio and selectively and effectively reduces the largest sources of risk. This is done by limiting the delta, i.e. the dependence on the price change of the underlying asset. The last measure remaining is the neutralisation of the option positions.
Customised investment solution
The 7orca Short Volatility Strategy is offered to institutional investors as a special fund, which enables them to make further adjustments to their specifications, such as risk budgets, floor values and base investment. In addition, investors can invest in our UCITS-compliant mutual funds.
Volatility Risk Premium as a Source of ReturnOur strategy offers access to volatility as an attractive alternative risk premium. It is economically valid and empirically verifiable.
Implementation in Diversified markets and Liquid InstrumentsThe volatility risk premium can be found on the equity, bond, forex and commodities markets. In order to use the advantages of diversification and reduce risks, we diversify across a variety of underlying assets and markets. We focus on highly liquid, exchange-traded instruments on the options market.
Investment ProcessWe follow an active and systematic investment style. For each new transaction, we take the current market and the volatility environment into consideration and define the option parameters dynamically.
Strict Risk ManagementWe place a great emphasis on disciplined and effective risk management in particular. The challenge here is to limit risks at an early stage while continuing to take advantage of opportunities.
CustomisationWith our short volatility approach, we have created a framework that can be customised to our clients’ specifications for target return, risk budget or investment universe. Implementation can be carried out in a special fund, in the segment of a master fund or in a managed account.
Base InvestmentThe options strategy can be supplemented by a base investment that generally can be freely selected and adapted to specific client requirements.
ReportingWe prepare customised reports for our clients and are able to take specific requirements into consideration.
ReturnsBy harvesting volatility as an alternative risk premium, the 7orca investment strategy aims to achieve a long-term positive return that is largely independent of the prevailing economic and interest rate cycle. This feature offers a strong argument for inclusion in almost any portfolio and can improve the risk-return profile on a sustainable basis.