Higher Rates Create Opportunity for Hedging

Broken Pie Chart

The rise of interest rates has been all over the news, but is there a silver lining? Yes, due to higher rates in short-term US treasuries hedged equity strategies now can further manage risk by substituting out short duration high yield to short term treasuries. ZEGA Financial CEO Jay Pestrichelli and Derek Moore are back to explain how a flagship strategy Buy and Hedge is leveraging the new environment.

What are Buy and Hedge strategies?

Comparing the risk profile of short-term US Treasuries vs short-duration high yield bonds.

Comparing risk profile of treasuries to corporate bonds

Explaining the yield to maturity on bonds

Where a return comes from in a bond

Coupon payments(interest) vs appreciation to par

Interest rate risk in bonds

Duration as a measurement of how market values change for every 1% change in rates

How Buy and Hedge has limited risk in buying long call options and US treasuries

Mentioned in this Episode:

Why hedging is the answer for investors https://podcasts.apple.com/us/podcast/why-hedging-is-the-answer-for-portfolios-can-hedgers/id1432836154?i=1000578323267

Margin Call Movie and Value at Risk Explained https://open.spotify.com/episode/2XJ58KAoQKw2sdC48KHyPp

Derek Moore’s book Broken Pie Chart https://www.amazon.com/Broken-Pie-Chart-Investment-Portfolio/dp/1787435547/ref=sr_1_1?keywords=broken+pie+chart&qid=1558722226&s=books&sr=1-1-catcorr

Jay Pestrichelli’s book Buy and Hedge https://www.amazon.com/Buy-Hedge-Iron-Rules-Investing/dp/1087941849/ref=nav_signin?_encoding=UTF8&qid=&sr=&asin=1087941849&revisionId=&format=4&depth=1

Contact Derek [e-mail]