Option Writing Premiums: Bright Spot in a Dark Year
Highlights
- While the Federal Reserve’s monetary policy contributed to a challenging year for stock and bond investors, it had a beneficial impact on index option writing cash flows.
- As investors weighed a range of risk factors over the course of 2022, demand for index options was strong, setting records for trading volume and open interest.
- Above average volatility as measured by the Cboe® Volatility Index (the VIX®) was persistent throughout the year, resulting in persistently elevated option premiums.
- With additional rate hikes expected this year, the environment may continue to be supportive of index option writing cash flows, which can potentially benefit low volatility equity strategies like those managed by Gateway Investment Advisers.
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