Wednesday, 14 August 2024 03:55

Overlays are the Option You Need

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Investors concerned about exchange-traded funds (ETFs) with options overlays limiting returns should consider the benefits these strategies offer. According to Tony Rochte, Morgan Stanley’s global head of ETFs, options serve as a hedge against significant losses, offering downside protection even if upside gains are capped. 

 

This approach encourages investors to re-enter the broad-based equity market, reducing their exposure to fixed-income products. Alison Doyle, Nasdaq’s head of ETP listings, highlighted the growing popularity of active ETFs, with over 75% of all ETF launches in 2023 being active. 

 

Among these, a significant portion included options-embedded strategies, providing additional risk management tools. This trend shows a shift from traditional fixed-income investments to risk assets.


Finsum: With stocks and bonds becoming more correlated, investors should consider outside strategies like overlays to hedge. 

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