More on Derivatives

BIA has developed extensive expertise in derivatives, originating in the 1970s. This unique skillset differentiates BIA from many traditional managers. For derivatives exposure, we mostly purchase long-term equity anticipation securities (LEAPs).

WE USE LEAPS:

  • To express high conviction, as LEAPs require less capital for similar exposure, introducing greater upside reward and defined downside risk.
  • When volatility is inexpensive. This occurs when markets are relaxed, and investors don’t expect large movements in securities prices.
  • To eliminate counterparty risk, as our derivatives are all exchange-traded.

WHAT IS A LEAP?

  • Long-term equity options with maturities up to 2.5 years from purchase date.
  • 1 LEAP is the right to buy ("call") or sell ("put") 100 shares of stock at a pre-determined price ("strike") any time between trade date and expiration date.
  • Downside is limited to premium invested and upside is unlimited.