Video Webcasts

A Strategy to Quell Market Chaos - The Modified Collar

Philip Gocke, Managing Director of The Options Industry Council, discusses strategies that may help fund managers control risk, gain alpha and quell market volatility. The University of Massachusetts’ Center for International Securities & Derivatives Markets recently released a modified collar study that evaluated nine years of data on the Powershares QQQ exchange traded fund.

Authors Szado and Kazemi found in their paper, "Collaring the Cube: Protection Options for a QQQ ETF Portfolio" that a modified collar strategy using a six month put purchase and consecutive one month call writes provided far superior returns compared with buying and holding the NASDAQ-100 Index® ETF with about one-third of the index volatility. Over the 108 month study period, this collar strategy returned more than 150% cumulatively, while the cube portfolio lost over 12%.