Mark: Damian, appreciate you being here today and thanks for joining us.
Damian: My pleasure, Mark.
Mark: You and your team deploy option writing as a core part of your process. Can you discuss in a little bit more detail why options writing is a strategy that’s been popular with institutional and high net worth investors?
Damian: Well, quite frankly, in this low yield environment, to have a strategy that can generate substantial income while allowing you to customize the risks(?) and the return parameters to fit pretty much any mandate is extremely compelling and option-writing strategies allow that. Depending on what you need in term of income and what you can tolerate in term of risk, you can customize and have a bespoke strategy that fit your mandate. And option writing has been very popular, widely used and successful among institutional and high net worth investors, with various industries benchmark such as the S&P 500 put right and buy right indices existed since the early 2000s.
Mark: Then, within the context of generating income, what types of option-writing strategies are available to investors to do that?
Damian: Well, generally, option-writing strategy can fit in three buckets. The first bucket isn’t really in the scope of this discussion because this require a lot of leverage as well as could be fairly high risk and very complex. That is delta neutral option writing. The second bucket tend to be higher risk and also use a fair bit of leverage, and that is naked option writing. And this is where you write calls without actually owning the shares and you write puts without having the cash to really collateralize it. And the final bucket, which is fairly, on a relative basis, lower risk and still can generate quite a bit of income, and that is cover option writing. In this bucket, you can write cover calls which are call option that you write, but back against the shares that you owned you can also write cash-secure put options. These are put options that you write against the cash that you hold in reserve in order to take delivery of the shares if needed.
Mark: Damian this has been an insightful conversation, appreciate your time and insights. Thank for being here.
Damian: My pleasure Mark.
