New Research on Options

Advisors who currently use options in clients’ portfolios to generate premium income by writing covered calls, or those who hedge with options, may want to take a closer look at a new service from Standard & Poor’s Advisor Insight called Standard & Poor’s Options Strategies. Based on S&P Equity Research, and InvestorsObserver.com options expertise, the new options service provides subscribers with options ideas, models, and education.

“This is a way for advisors to play S&P’s equities research with options,” says New York-based Gene Riccoboni, a former floor trader at COMEX, the commodity futures exchange, and now S& P’s director of options strategies. “Even though a lot of advisors use options, a lot don’t, and a lot don’t know much about options, so we’ve tried to beef up the educational side of things,” by partnering with the Options Industry Council, and with live-help phone lines.

The new service uses a risk-rating system of one to five “keys” to tell advisors which strategies are considered conservative versus which are higher-risk, and provides daily morning updates, model hedging portfolios, neutral fair value strategies, and other options ideas. The philosophy of the site is: “We’re not doing any naked call writing or put writing here or anything along those lines. These are very limited risk situations,” says Riccoboni. Two of the portfolios, InvestorsObserver.com’s Conservative Covered Call Plus Monthly Portfolio, and Dividends Plus Monthly Portfolio, are, in the context of the options world, fairly tame, “of their ten model portfolios, these are their most conservative ones,” says Riccoboni. These are the ideas that advisors might use in some client’s portfolios, to generate alpha by selling covered calls, or doing certain types of spreads. And, as with dividends, the premium income can act to cushion a portfolio during a downturn.