In The News

With the Federal Reserve’s steady march toward normalized rates at the front end of the yield curve, U.S. Treasury yields on 1- and 2-year maturities have risen from next-to-nothing, to a potentially interesting baseline for investment. Today, the 2-year Treasury pays an annualized income of 2.53%*, 118 basis points higher than this time last year.

So how can advisors and their clients rebalance portfolios without incurring capital gains? Some are turning to a Buy-Write options strategy. The “Buy” part of the phrase includes stocks that an investor already owns, while “Write” refers to using options to rebalance the risk of client portfolios in a more tax-efficient manner.

Under pressure to explore new ways to hedge their risks while cutting fee expenses, institutions are taking a fresh look at listed options — in some cases, at the expense of hedge funds. In search of great returns and limited risk, individual investors have long used listed options — a contract to buy or sell a security at a particular price — as a way to reduce risk in their portfolios.