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Paid episode

The full episode is only available to paid subscribers of Capital Flows and Asset Markets


A tried and tested hedge fund strategy, packaged as a retail product

To understand an autocallable or structured product does require some knowledge of the option market, as autocallables makes heavy use of derivatives. One of the classic strategies for hedge funds and portfolio managers have used to earn extra yield on a portfolio or even on a single stocks is to sell put options. Selling puts is in many ways like selling insurance. As long as you are selling at the right price, its a great business. You get the cash up front, and if nothing goes wrong you get to keep the cash. It is such a common strategy that CBOE has an index on the hypothetical returns of such a strategy. As you would expect, it underperforms in raging bull markets, such as from 2009 to 2021, but outperforms in sideways markets such as form 2000 to 2009.

The attraction of a Put Writing strategy is more apparent in Europe than the US, where the returns have been far higher, and generally speaking with far lower sell offs (ignoring the Covid bear market).

Autocallables offer high yields to investors through two main channels.

The full video is for paid subscribers

Autocallables and Volatility
Autocallables and structured products and short volatility products
Russell Clark