The fears of the Coronavirus Pandemic that started in February escalated in March and took a toll on equity markets as every major index quickly fell into Bear Market territory. Market volatility remained at historically high levels that we haven’t seen since 2008 as the CBOE Volatility Index averaged 57.75 points and peaked at 82.69 points. This type of market environment can be detrimental to a portfolio, but the Trilogy Fund was able to take advantage of this volatile price action as two of the 3 Trilogy buckets had positive performance in March.
The Option Income bucket was the largest contributor to performance in the Trilogy Fund as it returned 7.05%. When volatility is high, option prices are inflated as the uncertainty creates an opportunity to collect more premium on the options Trilogy is opening in this bucket. Because of the move down in markets, the Fund was able to close some of the call options in this bucket for a solid profit.
The Market Movement bucket was also able to collect more premium for the calls Trilogy had sold throughout the month of March. These call options combined with the puts we had open provided positive gains to the Fund’s performance. The Market Movement bucket returned 2.14% for the month of March.
Given markets experienced the quickest Bear Market in U.S. history, the Collared Equity bucket had a loss of -7.37% for the month of March. The Fund’s option collar was able to provide some protection during this down move, which lessened the impact of the drawdown.
The Option Income and Market Movement buckets were able to negate the losses in the Collared Equity bucket. For the month of March, the Stadion Trilogy Alternative Fund I-Share returned 1.82%, the Bloomberg Barclays US Agg Index lost -0.59%, and the S&P 500 Index lost -12.35%.
To view the most recent performance for the Stadion Trilogy Alternative Return Fund, click here.
Bloomberg Barclays Capital U.S. Aggregate Total Return Bond Index is an unmanaged index of prices of U.S. dollar-denominated investment-grade fixed income securities with remaining maturities of one year and longer.
A collar is an option strategy that limits the range of possible positive or negative returns on an underlying security to a specific range.
A bear market is a condition in which securities prices fall and widespread pessimism causes the stock market's downward spiral to be self-sustaining. Investors anticipate losses as pessimism and selling increases.
The S&P 500 Index is the Standard & Poor’s Composite Index of 500 stocks and is a widely recognized, unmanaged index of common stock prices.
The CBOE Volatility Index is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.
One cannot invest directly in an index.
The Report’s commentary, analysis, opinions, advice, and recommendations represent the personal and subjective views of the author and are subject to change at any time without notice.
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