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Roni Israelov, President and CIO: NDVR

Alpha Exchange

CHAPTER

The Put Spread Collar: A Strategy for Rebalancing Luck

There is this gargantuan put spread collar on the S&P that gets rolled at the end of each quarter for a new quarter. The investor buys a 9580 put spread and then sells a zero cost call against it, a call that reduces the overall trade to premium neutral. But what's interesting to me is that this is in fact a short volatility strategy. It's not a long volatility strategy. So when people are thinking about implementing an equity hedge or protection strategy, I do wonder if a short volatility Strategy is the way to effectively protect one's downside risk.

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