The Metamorphosis of the Butterfly & Why Volos' Optimized Butterfly Index is a Next-Generation Volatility Strategy
We recently launched the Volos Optimized SPY & TLT Butterflies Index (VOSTB) in partnership with a family office to provide high-net worth individuals a strategy that produces high absolute returns from a US equity & fixed income exposure with a fixed-downside risk.
The index tracks a modified put spread butterfly strategy on SPY & TLT and follows a 3 by 4 by 1 pattern (buying 3 out-of-the-money puts, writing 4 at-the-money puts, and buying 1 in-the-money put) versus a more traditional 1 by 2 by 1 approach in order to generate higher returns from the upward bias of the market in exchange for higher downside risk. In order to mitigate the increased risk, VOSTB utilizes optimization technology to tighten the spreads when volatility increases.
VOSTB Generates Performance When Your Portfolio Lags
VOSTB has performed incredibly well with the index increasing 36.2% in 2020. Despite inflation fears creating a difficult environment for fixed income (TLT currently down over 12% YTD), VOSTB is up slightly on the year at ~.6% and produced 7%+ returns in April as SPY & TLT traded sideways. Here are some other high level VOSTB highlights:
As of May 11th, VOSTB has achieved annualized returns of 19.5% since it's June 2014 inception with ~15% volatility (versus the SPY's ~18%).
VOSTB has never suffered a drawdown greater than 17%. During the COVID correction, the index appreciated returning 4.9% and 4.4% in February and March respectively.
VOSTB consistently produces positive returns. Since inception, it has produced positive returns in 68% of all months. In 20% of the months, VOSTB produced greater than a 5% return (compared to 10% of months where VOSTB returns were less than -5%).
VOSTB can be fully funded through margin on an existing long only portfolio and provide uncorrelated returns to the market.
Available for Direct License
The Volos Optimized SPY & TLT Butterflies Index is available for direct license. To view index details, please visit the VOSTB profile.
For licensing details on VOSTB or additional information, please reach out to jeff.corrado@volossoftware.com or wr@wraquet.com.
About Volos
Volos provides financial Indexes and technology for institutional investors.
We specialize in indexes for options and derivatives strategies, providing transparency to this traditionally opaque asset class.
For additional information on Index licensing and services, please contact licensing@volossoftware.com.
