Ansbacher Investment Management to Launch Pure Equity Index Variance Swap Strategy in Q3

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Ansbacher Investment Management, Inc. (http://ansbacherusa.com) plans to launch an equity index variance swap strategy in the third quarter of this year to take advantage of the persistent overpricing of broad based equity index volatility.

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Ansbacher Investment Management, Inc. (http://ansbacherusa.com) plans to launch an equity index variance swap strategy in the third quarter of this year to take advantage of the persistent overpricing of broad based equity index volatility. According to Max Ansbacher, President of the firm, "variance swaps are a pure play in a space where we already have years of experience. They offer a way to capture the excess volatility risk premium which is generated by the hedging activity of the large number of investors who are long equities."

Equity investors tend to overpay for index puts to insure their portfolios, driving up index option prices and causing index option Implied Volatility to consistently exceed subsequent Realized Volatility. Ansbacher added, "this overestimation, in fact, averages almost 33% a month and is something we have taken advantage of in our index option selling programs." Variance swap strategies can be structured in a systematic way to gain not only exposure to this premium, but to effectively hedge against the tail risk that is inherent in being short volatility.

The strategy will be short near term variance swaps on a basket of domestic and international indexes and will hedge the exposure with longer-dated forward start swaps. "Interestingly, while there can be no assurance of future results, our backtesting shows that some of the best performance from this program comes during large drops in the equity markets," adds Jason Ungar, a Director at the firm. Contact Jason Ungar, 212-308-2929, for details.

Ansbacher Investment Management is one of the oldest volatility trading firms in the U.S. with a track record going back to 1995. In addition to the variance swap program, Ansbacher offers a low volatility, market neutral, index option writing strategy, and active programs benchmarked to the CBOE Standard & Poor's BXM and PUT indexes.

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