White paper

Jan. 5, 2019

Seeking Options: Defining and Managing Risk

White paper — Overview

Options-Based Strategies as an Asset Class

In today’s low yield, high-risk investment environment, traditional choices for investors seemingly have become more limited and often times dangerous.


However, over the past several decades other “options”, pun intended, has arisen for investors – option-based strategies. Option-based strategies have proven themselves through difficult market environments for equities, bonds, and other liquid assets. These strategies seek to define the risk and reward over a particular time frame through the usage of options. Options have become a new weapon of choice that can be used to change investment outcomes based upon the preferences of the investor. Investors literally have more options.


Historically, the use of options has often been unfairly dismissed as a viable investment solution and often times been viewed as anathema in the investment world. Derivatives have often been blamed for a lot of the financial mishaps of financial institutions, hedge funds, and markets in general. Perhaps it is natural to fear something that isn’t properly understood, and thus the importance of education and knowledge in this area.


At Swan, we believe it is vital to educate investors on how options can be a key portfolio management tool. Options are not a scary, esoteric, rarely used tool used only by speculators or sophisticated investors like financial  institutions. In fact, investors have used options for decades in many different ways to hedge risk and/or generate income. 


We explore the various option-based strategies and analyze their efficacy to managing risk, leveraging research from some of the industry’s foremost experts in the use of options.