Equities rallied in October after a little bit of a volatility in the beginning of the month. This upward action seemed to be mostly hitched to a potential "mini-deal" with China which, if it happens, might alleviate some uncertainty around global trade. The S&P 500 Total Return Index was +2.177% for the month. On the fixed income side of things, the front end of the yield curve, which marks the rate for shorter duration instruments, came down a little bit while the back end, which does the same for longer duration products, rose. The Bloomberg Barclays US Aggregate Total Return Index was +.30%.
Inside the Trilogy portfolio we saw positive performance in the collared equity sleeve. While the equities rose with broader indices, we saw some drag from our S&P 500 based collar which serves to help mitigate losses during prolonged drawdowns in equity markets. The contribution effect of this portion of the fund was .03%.
The option income component had a good month as we saw fixed income contribute slightly, but the bulk of the return was from our option selling component. Volatility dropped significantly during the month which helped positions we were already short. We were also able to take advantage of early moves to close trades at profits prior to larger moves in the S&P 500. The contribution effect of this portion of the fund was .33%.
The market movement portion of the fund was a drag during October. The move higher which helped our long portion was offset by losses from the protection that we have in this portion of the portfolio in the form of long put spreads. The contribution effect of this portion of the fund was -.55%.
To view the most recent performance for the Stadion Trilogy Alternative Return Fund, click here.
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 Bloomberg Barclays Global Aggregate Bond Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging markets issuers.
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 long (or long position, AKA exposure) ) is the buying of a security such as a stock, commodity or currency with the expectation that the asset will rise in value.
A short, or short position AKA exposure, is selling first and then buying later. The trader's expectation is that the price will drop; the price they sell at is higher than the price they buy it at later. The difference between the sale price and the buy price produces a profit or loss.
A call spread is an option spread strategy that is created when equal number of call options are bought and sold simultaneously.
A put spread is an option spread strategy that is created when equal number of put options are bought and sold simultaneously.
One cannot invest directly in an index.
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