Introduction to and Objectives of the Protective Put A protective put strategy combines a long stock position with a put option, representing the first half of put-call parity. This combination is sometimes referred to as a married put. The name…

Introduction to and Objectives of the Covered Call A covered call strategy has two components: long and short stock positions. The term “covered” signifies that the short call is backed or “covered” by the underlying stock an investor holds. If…

 Position Equivalencies Options contracts can be utilized to replicate investment positions. When two positions have identical risk exposure and payoff, they are considered equivalent according to the law of one price. This means that they must have the exact…

Reading 11: Trade Strategy and Execution Los 11 a: Discuss motivations to trade and how they relate to trading strategy Los 11 b: Discuss inputs to the selection of a trading strategy Los 11 c: Compare benchmarks for trade execution…

Sample Free Structure $$ \begin{array}{c|c} \textbf{Standard fee} & 0.55\% \\ \hline \textbf{Base fee} & 0.25\% \\ \hline \textbf{Sharing} & 16\% \\ \hline \textbf{Breakeven active return} & 2.00\% + \\ \hline \textbf{Maximum annual fee} & 0.69\% \end{array} $$ $$ \textbf{Sample Fee…

These fees are determined by portfolio returns and are intended to reward managers who create value. Performance-based fees are structured in one of three basic ways: Symmetrical structure in which the manager is fully exposed to both the downside and…

Prospectuses, private placement memorandums, and/or limited partnership agreements all contain the terms of the investment management services. Allocators must make sure the terms involving liquidity and management fees all make sense, given the portfolio goals. Liquidity refers to the ease…

An investment vehicle refers to the type of account(s) used to hold an individual's investments or the ownership structure. There are two primary options: commingled or pooled investment vehicles and separately managed accounts (SMAs). Each has its own unique set…

Assessing potential managers' investment philosophy and decision-making process serves as a risk mitigation strategy. Allocators aim to gain insights not only into the manager's past investment performance but also how it was achieved, the underlying processes, and its potential repeatability….

Capture and drawdown ratios aid clients in evaluating a manager's suitability. For instance, a retiree seeking a safe and conservative investment manager may prefer avoiding those with frequent, substantial drawdowns. In contrast, a young, risk-seeking investor might be more tolerant…