Panel on Trends in Institutional Options Usage at RMC

The first panel discussion at the CBOE RMC discusses Trends in Institutional Options Usage. Philip Kosmala from Taiber, Kosmala & Associates was the moderator for this discussion. 

The participants were –

Clayton Cutler, Head of Risk Taking and Portfolio Management, The Hartford

Nancy Davis, Director of Derivatives, Alliance Bernstein

Greg McMurran, Chief Investment Officer, Analytic Investors

David Villa, Chief Investment Officer, State of Wisconsin Investment Board


Some highlights include –

It was said that the current environment for Insurers is transitional. Their approach to risk management has changed as products have become more sophisticated. Historically insurers have not used volatility instruments. However, there appears to be an expansion of insurer use of VIX derivatives on both the annuity side and using VIX to hedge volatility exposure. 

Institutionally there are three trends new entrants, cross asset strategies, and strategies to take advantage of structural differences.   Geographically there are new entrants as well as different types of institutions entering the markets. Cross asset strategies have emerged as opportunities arise. Derivatives allow a simple method of increasing or decreasing exposure as markets fall in and out of favor. 

It was noted that put purchasers have been looking at option selling strategies to offset the cost of protection. Also it was noted that more institutions are seeing value in option selling strategies such as cash secured puts or covered calls to enhance portfolio performance while entering or exiting position.