- Gateway has a long history of using option strategies to reduce equity market volatility. This approach dates back to the 1970s and the advent of listed option contracts.
- Equity market volatility is one of the primary focuses of our firm and we are seeing levels we have not seen since Q4 2008.
- Because of the nature of the sell-off, it seems as though the market is pricing in elevated levels of risk further out than it typically does. It seems this high level of volatility is anticipated to be with us for the next several months to maybe half a year, looking just through the lens of option pricing.
- The Gateway strategy’s goal in the portfolio is to stabilize and manage the equity risk.
All investing involves risk, including the risk of loss. There is no assurance that any investment will meet its performance objectives or that losses will be avoided.
Equity securities are volatile and can decline significantly in response to broad market and economic conditions. Options may be used for hedging purposes, but also entail risks related to liquidity, market conditions and credit that may increase volatility. The value of the fund’s positions in options may fluctuate in response to changes in the value of the underlying asset. Selling call options may limit returns in a rising market.
Index option (European-style expiration, cash settled and exchange-traded): an option contract on an index (e.g., S&P 500) in which the buyer (owner) pays a cash premium up front to the seller (writer) of the option. If at expiration, the option contract is in-the-money, the seller pays the owner cash in the amount of the difference between the option strike price and the current value of the index; otherwise, the option expires worthless for the buyer and the seller keeps the full premium received up front. The writer of an option is paid a cash premium for taking on the risk associated with the option obligation to pay if the option expires in-the-money. Listed index options contracts can be closed or traded prior to expiration date, but not exercised.
Before investing, consider the fund’s investment objectives, risks, charges, and expenses. Visit im.natixis.com or call 800-225-5478 for a prospectus or a summary prospectus containing this and other information. Read it carefully.
This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary. The views and opinions expressed are as of March 13, 2020 and may change based on market and other conditions.