Wealth Advisor Magazine September 2024 Edition - 22

MARKET MIND
All This and Options
W
hile the algorithmic
models are the foundation,
HTUS also incorporates
multiple options
overlays to manage
risk as well as reach for alpha. Veteran
trader Euan Sinclair runs that side of
things under the title Senior Financial
Engineer. We were lucky enough to
talk to him too.
THE WEALTH ADVISOR: A lot of people
think of options as opaque, scary,
arbitrary or all of the above. What do
you think of that?
EUAN SINCLAIR: I think we're none
of the above, but I can certainly
understand why people would have
trepidation around a lot of options
trading ETFs because, frankly, a lot of
them don't really trade. They'll come
in, they'll do the same thing every
day, which to me makes absolutely
no sense. Coming in and just selling
something irrespective of the price
is kind of lunacy and that's as far as
possible away from what we do.
So how is HTUS different?
Ootions, no matter what you are doing
with them are driven by volatility.
22 | SEPT/OCT 2024
Their price is entirely dependent on
the volatility of the underlying . . . in
our case, the S&P 500. So you have
to go through the work of trying to
predict volatility, which in some ways
is easier than predicting price. It's
harder to monetize, but it's easier to
make that prediction as long as you
actually do the work, go through the
mathematics.
And I don't like to think of what we
do on the option side as an overlay. I
think it's very much an integrated part
of the entire system because we are putting
these option strategies in a way that
is in concert with what we're doing.
Not arbitrary at all. Controlled.
Absolutely. We are not doing this in
a black box formulaic way. We are
adapting to current conditions, managing
our risk according to current conditions.
And can the options be risky?
I mean, sure. So can cars. We have a
model, but we always know what the
model is doing and why it's doing it.
And then we watch the model. I treat
it the same as if I'm teaching a junior
trader. I encourage the model to do its
thing, but I'm always watching over it
as well.
THEWEALTHADVISOR.COM
Coming in and
just selling
something
irrespective of
the price is kind
of lunacy and
that's as far as
possible away
from what we do.
http://www.THEWEALTHADVISOR.COM
Wealth Advisor Magazine September 2024 Edition

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