Growth Optic
Income | Growth-Oriented Equities | Capital Appreciation | Reduced Volatility
Historical Performance
*Inception is June 1, 2022
Note: Inception and YTD data above are not annualized. See the accompanying disclosures below for important information on composite construction, performance calculation methodology, and the differences between Growth Optic and the indices.
Growth of a $1,000 Portfolio
Note: Growth Optic performance is net of fees and transaction costs; it is not possible to invest in an index and advisory fees and trading costs do not apply to indices. See Important Disclosures below.
Growth Optic Quarterly Income per $100 Invested (Net)
Trailing Four Quarter Yield: 11.4%
Note: Income for each quarter is calculated by dividing the net income of each category by the total value of the composite at the beginning of the quarter. Trailing Four-Quarter Yield sums the quarterly yield for each of the previous four completed quarters. No amount of income is guaranteed, and some periods may provide little or no income.
Option Strategy
There are several ways to approach option trading. Optic utilizes technical analysis to determine optimal times to sell in and out of call positions. It also identifies the ideal call to be selling depending on various circumstances. We actively manage these option positions with the goal of delivering the many advantages of covered call selling while still seeking to capture much of the upside appreciation of the underlying holdings.
Strategy Objectives
The Growth Optic strategy seeks to generate premium income through the sale of covered calls against a basket of Large Cap growth equities. Due to the option premium income, the Optic strategy may experience lower volatility than a non-option strategy holding the same basket of underlying stocks. Large Cap Growth stocks typically don’t pay attractive dividend yields. Growth Optic is a way to generate an income stream off of a basket of traditionally low-yielding equities.
Strategy Documents
How it Works
Optic managers select a basket of Large Cap Growth stocks after filtering them through several fundamental and technical screens. Then, utilizing Optic’s active trading model and proprietary methodology, call options are written against the holdings with various timing and quantities. Option premiums and dividends (if any) are returned to investors in the form of regular distributions.
Growth Optic begins with an ownership position in a basket of growth-oriented stocks.
Proprietary modeling software and analysis determine opportune options windows
Covered call options are sold on a tactical basis and include ongoing active management of the option positions
Frequently Asked Questions
The Growth Optic strategy involves acquiring a stake in a hand-picked basket of growth stocks and using skilled analysis and proprietary methodology to tactically sell covered calls against each of the holdings in the basket to generate income and potentially reduce the risk of the holdings.
Returns are expected to approach those of each of the underlying stocks, although the individual stocks are more likely to outperform the strategy in appreciating markets. The option premiums generated are likely to reduce the downside risk of holding a long position in the stocks alone. Please see the most current fact sheet for performance and important disclosures and please also review the important disclosures on this webpage and elsewhere on this site.
Growth Optic is most suitable when it is used as a portion of a client’s overall equity allocation. Since the strategy sells covered calls, it may be a fit for investors who are looking to add income from option premiums while also hedging downside risk on a representation of growth companies.
The Growth Optic strategy utilizes proprietary software and in-house analysis to sell call options during opportune windows. Such covered call strategies can help smooth out returns during volatile market periods, but no investment strategy is completely without risk. Growth Optic consists of a concentrated basket of stocks, so it is best used as a portion of a client’s overall equity allocation. These growth stocks also tend to be more volatile than Large Cap Value stocks. Since nearly all of the strategy’s funds are invested in the underlying stocks, declines in the value of those stocks may significantly negatively impact the value of Growth Optic. As such, investors should consider all of their investment in Growth Optic at risk.
Please see the historical performance data provided above.
Optic Asset Management charges a management fee of 0.50% to 1.0%, withdrawn quarterly. Investors are advised to speak with their investment advisor for more details, along with any additional fees they may charge. Investors will also pay transaction costs on options trades. Options trading is generally more expensive than equity trading and costs vary among brokers and custodians. Transaction costs can significantly reduce return.
The minimum investment amount required to participate in the Growth Optic strategy may vary but is generally not less than $100,000. Investors should consult with their advisor for more information.
The frequency with which trades are made in the Growth Optic strategy may vary depending on market conditions and other factors. The manager utilizes proprietary modeling software and expert analysis to determine opportune option-selling windows and to select options that are expected to provide the best investor return. Growth Optic should be considered a high turnover strategy. As noted above, transaction costs can negatively affect return, especially as trading volume increases.
Div Optic will receive qualified dividends as well as generate capital gains/losses. For this reason, Div Optic works best in qualified retirement accounts. Investors should be aware that selling covered calls may result in taxable events (including the potential of both short- and long-term capital gains/losses), and that the tax implications of investing in the strategy may vary depending on the investor’s individual circumstances. Investors should consult with a tax professional for more information about the potential impact on their own tax situation.
Regular performance reports on the models are available on www.optic-am.com. Also, clients will also receive individual performance reports directly from the manager in addition to regular statements from the custodians.
To invest in Growth Optic, a separate account will need to be established at one of the many custodians that we work with. In addition, we will need to get the account approved for option trading. We provide a seamless onboarding process that can often be executed through electronic signatures once we receive all of the necessary information from a new client. Please contact us for more information about the onboarding process.
Investments in Growth Optic are liquid and may be redeemed at any time. Redemption processing times vary by custodian, but funds should be available within a few days in accordance with market hours and your advisor’s standard procedures.
Important Disclosures and Definitions
This information reflects the performance of Optic Asset Management’s “Growth Optic” Strategy. Optic Asset Management is a division of Watts Gwilliam & Company, LLC, a registered investment advisor. Growth Optic is a covered call-writing strategy applied to client portfolios holding a basket of stocks selected by Optic Asset Management that are generally characterized as growth-oriented companies. Stocks may be divested and replaced at any time.
The performance shown reflects actual client portfolios assigned to Growth Optic during the full periods shown. To be included, portfolios must be managed on a fully discretionary basis, and with an asset value of $50,000 or greater. Portfolios must be managed using Growth Optic for a full month before inclusion in performance results. The performance shown is net of fees and transaction costs. We apply the actual average weighted fee paid by the portfolios included in Growth Optic to the results. The average weighted fee varies over time but is approximately 80 basis points. This is less than the firm’s maximum fee of 1.25% but similar to fees paid by the majority of clients, including those whose portfolios make up Growth Optic. An increase in advisory fees will reduce performance; higher fees can have a meaningful negative impact on performance over time. Option transaction costs can be significant, and vary by the custodian or broker used. The actual impact of these costs experienced by our portfolios is reflected in the performance shown.
Past performance is not a guarantee of future results. No investment strategy can ensure a profit or ensure the investor will avoid loss. Since Growth Optic’s inception in June 2022, equity markets have exhibited significant volatility and uncertainty, including the effects of rising interest rates. While Optic Asset Management intends the Growth Optic Strategy to add value to investment portfolios, especially in flat or down markets, portfolios might underperform in rising markets. The performance presentation shown does not reflect the effect of taxes, which may be a significant consideration for taxable accounts. Investors using covered call strategies should be aware of tax implications as profits/losses are treated as capital gains. Tax treatment varies based on factors like holding period, dividends, and assignment. Seek professional tax advice for personalized guidance on navigating tax complexities and ensuring compliance with current IRS regulations.
Options trading involves risks. Prior to executing option trades, investors will receive from the custodian a copy of Characteristics and Risks of Standardized Options, also known as the Options Disclosure Document, which can be found at www.theocc.com. Clients must be approved for options trading by the custodian prior to Optic Asset Management being able to implement Growth Optic.
Index Descriptions
BXN Index: The Cboe NASDAQ-100 BuyWrite Index (BXN) is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the NASDAQ-100. The BXN is a passive total return index based on (1) buying a NASDAQ-100 stock index portfolio, and (2) “writing” (or selling) the near-term NASDAQ-100 (NDX) Index “covered” call option, generally on the third Friday of each month.
Index comparisons are provided for informational purposes and index performance is not intended to represent the performance of any Optic Asset Management portfolio. There are substantial differences between indices and client portfolios, including that indices are unmanaged and are not subject to advisory fees or transaction costs, including the often-material costs associated with option trades. It is not possible to invest directly in an index. Likewise, the Growth Optic strategy differs substantially from the indexes in terms of equity holdings and investment tactics. Where the BXN is a traditional, rules-based buy-write strategy on the NASDAQ 100, Growth Optic’s buy-write strategy uses active, tactical options trading limited to the equities selected by the manager.
Definitions
Standard deviation: Standard deviation is a statistical measurement used to indicate relative volatility of an investment or strategy. The greater the standard deviation of securities, the greater the variance between each price and the average (mean). Generally, a more volatile stock has a higher standard deviation.
Beta Coefficient: The Beta coefficient is a measure of the volatility of a fund relative to the overall market.
Upside/downside capture ratios: These measure an investment strategy’s performance in up or down markets relative to the NASDAQ 100 index. For upside capture, values over 1.0 indicate the strategy outperformed the benchmark during periods of positive returns for the benchmark. For downside capture, values of less than 1.0 indicate the strategy lost less than its benchmark during periods of negative returns for the benchmark.