Saturday, 25 March 2017
Last updated 23 hours ago
May 26 2010 | 12:19am ET
New York-based Golden Archer Investments has recently launched a pair of volatility arbitrage funds to bet on swings in the market. In February, the firm unveiled the Golden Archer VAF Fund and followed it up last month with the launch of the Golden Archer LBF Fund.
The firm decided to launch the two funds after closing its three-year-old multi-strategy arbitrage fund earlier this year, according to David Rucker, portfolio manager.
The VAF Fund is a market neutral volatility arbitrage fund and the LBF Fund is a long-biased vehicle, which uses a proprietary options pricing model to hedge its portfolio.
“We use the same pricing model that we use in the arbitrage fund to find underpriced hedges for our long portfolio,” Rucker told FINalternatives.
The LBF Fund trades only broad-based exchange traded funds and its composition changes monthly depending on market conditions.
“Opportunities are changing from day to day and where we get an edge is from the steepness of the volatility skews. Right now, volatility skews are extra steep so we would not be buying out-of-the money puts to hedge our portfolio,” Rucker said.
Rucker added that current tensions in North and South Korea coupled with the Greek financial crisis make market conditions ripe for his funds. Last week, the Chicago Board Options Exchange Volatility Index rose 30% and closed at 40.10 on Friday. The index reached 48.20 earlier on that day, which is the highest level intraday since March 9, 2009.
Both of Golden Archer's new funds charge a 2% management fee and a 20% incentive fee. The minimum investment requirement is $100,000.