eq_webFinancial Advisors Set To Increase Use Of Options In 2015

By: Daniel O’Leary


U.S.-based registered financial advisors are becoming more sophisticated with their use of options as hedging strategies, presenting an avenue of potential growth for brokers, financial boutiques and custodians.

Dominick Paoloni, founder and CIO at IPS Strategic Capital in Denver, said there was growing interest from advisors for listed options strategies and overlays. “I really think we’re continuing to see a rise from the financial or investment advisor community in the use of options to hedge and manage risk and overlay strategies; I think that’s good for us,” he told EQDerivatives.

Paoloni founded IPS in 2009, releasing a number of structured note strategies around options on the Chicago Board Options Exchange Volatility Index, which IPS builds directly into customer accounts. IPS typically targets pension, insurance firms and high net worth individuals and family offices. The firm was most recently marketing to hedge fund and fund of fund managers a novel hedge for short volatility strategies that could provide better returns during tail risk events.

Paoloni said custodian TDAmeritrade Institutional has been making inroads with financial advisors since its acquisition of online options trading platform Thinkorswim in 2009. “TD is really trying to promote advisors that are derivatives-centric, TD has been on the forefront,” he added.

TDAmeritrade held last week a conference in San Diego, with some sessions specifically targeting financial advisors in a bid to educate them on the use of options. The LINC 2015 conference also saw TDAmeritrade announce a strategic partnership with National Advisors Trust Company to offer corporate trustee services to RIAs that custody on the TD platform. The services were made available to the firm’s advisors last Wednesday, under the newly created Advisors Private Wealth Trust.

TD spokespeople did not immediately return calls.