Download PDF
6 Meridian

Hedged Equity – CC Portfolio

as of September 30, 2018

The Approach

The Hedged Equity-Covered Call portfolio seeks to capture the majority of the return of the stock market with less risk than other equity investments. The portfolio is comprised of between 20 and 30 large cap stocks with call options sold against each stock to decrease volatility and to increase current income. The stocks are selected utilizing our fundamental and quantitative models and the options are selected based on our proprietary option selling model.

The Features

Covered call strategies provide an alternative to traditional, long-only equity strategies while historically delivering similar returns and lower volatility than the S&P 500. Covered call strategies may not perform as well as unhedged equity strategies when the market is trending up but may provide better performance when the market is either flat or down.

In addition to selling call options, the manager may also hedge the portfolio by using inverse ETFs to provide additional protection against declining markets.