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Meridian brings a unique approach to risk management for clients. By carefully considering a client’s goals, objectives and risk tolerance, we are able to devise strategies that hedge risk with the use of options and Exchange Traded Funds (ETF’s). We pay special attention to:
- Correlation between individual holdings, entire portfolios and potential alternative hedging vehicles
- Identifying expensive and inexpensive options to create efficient hedging strategies utilizing put or call protection, collars and other strategies
- Increasing portfolio return with option overwriting strategies
Our group monitors real-time changes in implied volatility for clients to identify potential risk. Rapid upward moves in implied volatility reflect changing expectations for security prices that may not be reflected in the price of the underlying security. For the equity investor, an observed increase in implied volatility may serve as an early warning signal preceding a large change in the price of a security, allowing the portfolio manager or analyst to focus research efforts where options are suggesting the greater potential risk.
Option prices, when viewed across multiple strikes and expirations, can reveal the market’s expectations for the path of future security prices. This expectation may deviate significantly from what theory would suggest. While a security’s price reflects the momentary equilibrium between buyers and sellers, option premiums provide greater granularity over time and price.
To learn more about Meridian’s Risk Management capabilities, please contact Dan Hutchinson at 212-500-6650 or by email at: dhutchinson@meptraders.com
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| 5 Hanover Square, 21st Floor | New York, NY 10004 | Office: 212-500-6650 | Fax: 212-742-2737 |
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