Performance & Volatility
Last valuation date : 18-07-2019
Risk / Return from 03-03-2003
All information for an index prior to its Inception Date is back-tested, based on the methodology that was in effect on the Inception Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.
The key elements of the index methodology are available upon demand.
The Buy Write is an investment strategy in which an investor simultaneously buys shares and writes call option contracts over an equivalent number of shares. While this strategy can offer limited protection from a decline in price of the underlying share and limited profit participation with an increase in share price, it generates income because the investor keeps the premium received from writing the call. The NXS US Equity Enhanced Buy Write Index reflects the performance of a systematic allocation between two unique strategies: (1) a performance engine that offers US equity exposure and (2) a risk overlay strategy aiming at reducing volatility and drawdown.
The strategy is a systematic allocation between two unique strategies:
• A performance engine that offers US equity exposure: the S&P® 500 Low Volatility Target Beta Index.
• A risk overlay strategy aiming at reducing volatility and drawdown: the Natixis US Equity Call Overwriting Index.
The S&P® 500 Low Volatility Target Beta Index is a smart beta index created by S&P® Dow Jones that mirrors a long US equity investment strategy. It quarterly selects the 100 least volatile stocks of the S&P® 500, weighs the stocks in inverse proportion to their realized volatility and finally performs monthly Beta-adjustment to the S&P® 500 (Beta = 1).
The Natixis US Equity Call Overwriting Index aims to cash in the risk premia embedded in the S&P® 500 Index options by a daily systematic sale of call options on the S&P® 500. This strategy is negatively correlated to the S&P® 500 and is adjusted according to market conditions: increasing exposure in volatile markets, and reducing exposure in non-volatile markets.
Options are sold on a daily basis with a fixed maturity of 10 business days and held to expiry. The Call option strikes are equal to 102.5% in bullish equity markets and 98% in bearish equity markets.
Why Selling Short-Term Options?
• Selling calls monetizes the dearness of implied volatility as it is statistically higher than realized volatility while providing more gains than losses.
• Selling short term calls also optimizes the carry: reducing the call maturity and increasing the frequency of sale does not statistically increases the risk while increasing the income. Why Variable Call Strikes?
• In bullish equity markets, the risk in short call options increases. Increasing the options strikes to 102.5% enables to mitigate the above risk.
• In bearish equity markets, the risk in short call options decreases. Decreasing the options strikes to 98% enables to cash in the dearness of the implied volatility whilst maintaining an acceptable level of risk.
• A trend following indicator determines the equity market environment (bullish of bearish).