ETF Edge: Options strategies and commodities as a barrier against volatility

Yields

NDX cautious down , short term, interviewee explicit

explicit

RUT

Oil

Metals up , medium term, interviewee explicit

explicit

USD

gold up

Invesco 8.5
Asset Manager $1000.00B
John Burrello 9.0

ETF Edge: Options strategies and commodities as a barrier against volatility

metals

Central bank buying over the last three years (~1000 tons per year) and ongoing geopolitical tensions support continued price increases in gold. Gold is acting as a dedollarization tool and safe haven. Sustained central bank purchases, geopolitical risks, and macroeconomic uncertainty support an upward medium-term metals outlook.

4 calls

-8

slightly worse than random

ndx

We are reducing risk at least in a portion of client portfolios given elevated valuations, market concentration, subdued volatility but watch correlations carefully. Due to concentrated equity exposure, near record valuations, and risk factors like trade tensions, investor risk management and hedging increase, implying cautious short-term outlook.

3 calls

+4

no reliable edge (random outcomes)

Last Friday's sell-off and today's snapback rally remind us that markets remain on a knife's edge with equity valuations rising. Joining me are John Burrello and Steven Schoffall.

Host
John Burrello

The market has been climbing a wall of worry for some time. Timing the market is difficult, but you can prepare for sell-offs by bolstering portfolios with bonds, commodities, or option-based strategies that offer structural protection and non-interest-rate dependent income.
Current short-term volatility has increased, and option selling generates income in a relatively low volatility environment compared to historical averages. How do you find value in this?

Host
John Burrello

Option markets are efficient; low volatility does not guarantee profits in buying, and high volatility doesn't guarantee profits in selling. We do not employ leverage; we use fully collateralized options with laddering methods to diversify risk and adapt to changing environments.
Regarding the market outlook and risk management, are you more active now or comfortable letting positions ride?

Host
John Burrello

Timing is difficult, so we focus on preparing rather than predicting. Volatility is subdued relative to history, but we watch correlation carefully. We are leaning into hedges and reducing equity risk especially given concentrated exposure to select companies and valuations near all-time highs.
Steven Schoffall

Gold has traditionally been a safe haven, with low to moderate correlation to major asset classes and inverse correlation to the US dollar. Central banks continue to buy gold, enabling dedollarization. Geopolitical risks and trade tensions support a continued bid for gold.

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