Michael J. Oyster, CFA, CAIA is the chief investment officer of Options Solutions LLC. Mr. Oyster has broad experience as an investment strategist, advising investors on portfolio construction, options-based strategies, and derivatives hedging. His investment career began in 1994 as the senior quantitative analyst with Schaeffers Investment Research. He analyzed equity and index options, financial markets, and behavioral metrics, and managed several options-based investment strategies. In 1999, he joined Fund Evaluation Group LLC (FEG), an institutional advisory and asset management firm. As FEGs Chief Investment Strategist, Mr. Oysters counsel was regularly relied upon by investors for his expertise on markets and economic matters. He advanced established academic research to develop a momentum analysis strategy to improve asset weighting decisions at the portfolio level. He also led the firms investment allocation efforts and deployed $4 billion of discretionary capital.
Join Michael as he describes where the following misconceptions came from, and then he will explain the reality: (1) Options are risky, (2) Covered call writing caps upside potential in the stock, (3) When selling options, it's best to do so on high-volatility names, (4) Low levels of the VIX signal an impending market decline, (5) You can't get downside protection for free.
Beginning in 1981, interest rates embarked upon a 40+ year run of consistently declining. This systemic decline in rates supported one of the greatest long-term bull markets for stocks in history. Given the magnitude and duration of the stock market advance, many investors believe that the outsized returns that have been enjoyed for years should be expected into perpetuity. Such a belief may leave many disappointed. History shows that when the stock market fails to return 10% or more each year, certain options strategies have consistently outperformed. Other options-based strategies can be deployed to enhance returns when stock market performance is low.