AURIGA International
Auriga International Ltd. Employs a fully hedged US equity strategy, generally known as split strike conversion. The fund targets an average annual return of 5% - 7.5% above the risk free rate.
The fund manager acquires a basket of 30-35 stocks that mimics the S&P 100 Index (OEX); selection is based on the stocks volatility and correlation to the market. The manager uses a sophisticated, proprietary automated trading system that optimizes the basket of stocks to replicate the performance of the overall market. Once the basket is identified, the investment managers hedges the equity fund by establishing option positions. The manager sells out-of-the-money calls and buys at-the-money or slightly out-of-the-money puts on the index.
This strategy allows the stocks to appreciate to the call with the downside protection at the strike price of the put, creating a cross hedge collar. The (long) Put/ (short) Call options represent a 'synthetic' position, short of the market, which provides a hedge against the long stock position. The strategy has identified risk profit parameters.