Janus Henderson observes an unusual gap between individual stock implied volatility and S&P 500 volatility, allowing investors to collect higher premiums by selling call options on specific stocks rather than on the broader market. Jeremiah Buckley, portfolio manager at Janus Henderson, notes that some of the largest companies in the market have moved 10% to 20% in a single day without notable news, driven by thematic trading and flows into single-stock focused ETFs. The proliferation of covered-call strategies on the S&P 500 is suppressing its volatility, further widening the gap. This creates an opportunity for active managers to adjust strike prices, expiration dates, and coverage ratios, enabling them to generate income while preserving the upside potential of their positions.
Source: Read the original article
