The Hercules Systematic Volatility portfolio strategies seek to generate alpha using US Equity index volatility instruments by leveraging internally developed trading models and a rules-based investment process. The portfolio aims to produce risk-hedged, excess return with low correlation to broad market indices and makes the strategy ideally suited as an overlay. The strategies effectively buy or sell insurance premia that price the uncertainty in index movement resulting from market factors.
Market volatility from recessions and financial crises have historically hurt investors’ portfolio returns and financial goals. However, Hercules Systematic Volatility Strategies equip investors with a highly liquid source of all-weather return that benefits from market uncertainty.
For questions about our hedge fund strategies or any related topic, please contact our advisory team at email@example.com and one of our investment advisors will address them. The team at Hercules Investments seeks to gain your trust in meeting your investment goals and looks forward to having you as our client.
High Sigma is a very short-term option put and call writing strategy for investors seeking aggressive growth. High Sigma events, collectively defined as a 3-sigma to 3.5-sigma move, “should” occur every one-to-seven years if it is assumed that market returns follow a normal distribution as represented by the familiar bell-shaped curve. Such moves are regarded as “tail events” because they are extreme and therefore fall into the tails of that bell-shaped curve (the far left or far right portions under the curve). While the normal distribution assumption is extremely useful and convenient for many reasons, it is not an accurate reflection of how markets move. Therefore, a 3-sigma event may occur more often than would be “expected”, statistically speaking. The stock market’s expectations for future volatility is most often described using the VIX Index, which is derived from the prices of S&P 500 index (SPX) options. The VIX spikes over brief periods when the S&P 500 reacts to adverse events. After a spike occurs, the VIX has a strong tendency to “mean-revert,” to fall back to a lower average level that represents a normal market. When a (high sigma) tail event occurs, this mean-reversion pattern represents a profitable trading opportunity.
The 2020 US Presidential Election Trade is Hercules Investments’ tactical strategy to profit from temporary spikes in S&P 500 volatility associated with the election outcome.
History shows that the results on election night have triggered brief but substantial market corrections (and corresponding spikes in volatility) that quickly fade away once the market repositions. The volatility spikes are triggered by an unwind or rotation in risk exposures among large investors as well as an unwind in the options positions that serve to protect them from an adverse outcome, once the outcome is known. Spikes in volatility will be exacerbated in a situation where there is no clear result on election night and the results are postponed, further amplifying the profit outlook for this strategy.
The ITRS is a quantitative, rules-based, short-term options strategy for investors seeking aggressive growth. It is a market-neutral strategy, equally deployable in bull and bear markets. The strategy trades calendar events such as U.S. economic releases and Federal Reserve meetings, among others. The strategy presumes that specific past behaviors of market participants will periodically recur.
The strategy uses historical data to detect and act upon the recurrence of tradable behavioral patterns within data. The strategy seeks to profit from intra-day and intra-week price trend reversals on US equity indices such as the S&P 500, The Russell 2000, and the NASDAQ 100. Indices represent broad market segments, and offer improved predictability of price behavior, largely free from idiosyncratic movements unique to individual stocks. The strategy holdings are typically held for very short periods. Most positions coincide with U.S. economic announcements such as GDP, ISM, CPI, Employment, Fed. days, etc.
The strategy is tailored for accredited investors with a high risk tolerance while seeking aggressive growth, and optionally desiring maximum liquidity. The strategy can be used standalone in a portfolio or as a risk hedging overlay to other portfolio strategies due to its low correlation to most others.
Gamma Yield is a very short-term options put and call writing strategy for investors seeking aggressive growth. It specifically focuses on the unique risk characteristics of options on their day of expiration. The strategy looks to extract the remaining non-intrinsic value remaining in the option price as the time value of the option approaches zero.
The strategy restricts itself to the use of equity index options in taking broad market risk exposure. The strategy leverages the Index Trend Reversal model in identifying trade opportunities.
The strategy is suitable for accredited investors with a high risk tolerance while seeking aggressive growth, and optionally desiring maximum liquidity. The strategy can be used standalone in a portfolio or as a risk hedging overlay to other portfolio strategies due to its low correlation to most others.
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