Call-writing strategy has the potential to enhance cash flow in down, flat and moderately rising markets, while attempting to maintain equity exposure in strongly appreciating markets
Overview
Canvas Managed Options offer investors access to specialized, risk-managed investment capabilities. Investors can implement custom options solutions to complement and enhance their existing portfolios and to reshape their portfolio's risk vs. return profile.
Strategies are available as overlays of investor-owned assets in separately managed accounts or as part of a Franklin Templeton managed integrated solution. Depending on the investor's goals and objectives, the option capabilities may be applicable to either concentrated equity positions or diversified equity portfolios (financial advisor managed or commingled funds across a wide range of investment vehicles).
What are options strategies?
Benefits
Strategies attempt to maintain upside equity exposure, while:
Generating incremental cash flow
Managing downside risk
Risk-managed equity strategy has the potential to help manage portfolio downside (and benchmark beta) while maintaining portfolio upside participation (and manager alpha)
Reducing risk to portfolio beta and concentrated positions
Call writing has the potential to reduce portfolio volatility; risk managed equity also has the potential to reduce volatility and provide downside risk management
A unique and innovative approach to managed options investing
| A risk, return and diversification solution | Throughout market cycles, options overlay strategies have the potential to enhance cash flow or mitigate downside risk while maintaining upside performance. |
| Rigorous, rules based approach | Strategies adhere to a transparent, rules-based investment process, designed with strict guardrails to attempt to deliver total return and manage risk through minimizing |the effect of directional movements in an underlying security. |
| Deep industry experience | Over 30 years of option experience, having helped create today’s “risk-managed” options asset management business, along with designing and implementing industry leading research, technology and strategies. |
Featured investment capabilities
| Equity call selling | Index call selling | Hedged Equity |
"We believe holders of equity, whether concentrated or diversified positions, are inherently owners of equity volatility. Managed option investing has the potential to monetize that volatility in the form of excess cash flow and attractive risk-adjusted total return.
Pioneers in managed options investing
The Franklin Managed Options Strategies team has over 30 years of options investing experience. As pioneers in the “risk-managed” options asset management business, the team also has a strong reputation for working seamlessly with client’s existing custodians such as trust banks, investment advisors, and broker dealers.
Jon Orseck
Senior Vice President, Co-Chief Investment Officer, Portfolio Manager, Canvas Managed Options
Brad Berggren
Senior Vice President, Co-Chief Investment Officer, Portfolio Manager, Canvas Managed Options
Interested in learning more?
Take our 15-minute e-learning course “Explore your options: strategies for cash flow, risk management and diversification”.
Looking for more information?
Our team can help answer your questions about our managed options investing capabilities.
Important Information
Canvas Managed Options Strategies (Canvas Managed Options) are provided by O’Shaughnessy Asset Management, LLC, an affiliate of Franklin Templeton, and federally registered investment advisor.
Canvas Managed Options may rely on the investment objectives described in the relevant investment management agreement and communicated to the Client until such time as it shall receive written notice of the modification, alteration, or amendment of such investment objective.
When determining which options to sell and/or repurchase, Canvas Managed Options will consider factors including (but not limited to) option liquidity, maturity, volatility, interest rates, underlying dividends, and time to maturity.
Fees
The fee paid to O’Shaughnessy Asset Management is separate from and does not include the costs of stock and option commissions, clearing member trade agreement fees, exchange fees, dealer spreads (which are embedded in pricing) and other costs associated with the purchase or sale of securities, custodian fees, interest, taxes, and other portfolio expenses, which shall be the sole responsibility of client and shall be paid to parties other than O’Shaughnessy Asset Management. The custodian of the client account will debit the account for payments of any such fees payable to other parties.
Management fees will reduce the rate of return on any account or portfolio.
Tax implications
Buying or selling options, and any potential asset sales required to satisfy option obligations, if any, may result in tax consequences for the investors. Investors are encouraged to seek the guidance of their own independent tax advisor prior to implementing any option program. Under no circumstance is O’Shaughnessy Asset Management or its Canvas Managed Options team offering tax advice.
Franklin Templeton, its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.
WHAT ARE THE RISKS?
All investments are subject to risk, including possible loss of principal. There is no guarantee or assurance that any option strategy will achieve its investment objective.
Risk of loss/opportunity cost
The gain to an investor selling an option is limited to the premium received for the sale of that option. The loss to an investor buying an option is limited to the premium paid for the purchase of that option.
The loss to an investor selling a put option is limited to the strike price of that option, less the premium received for the sale of that option.
No guarantee of performance
Regardless of the appreciation or depreciation of the strategy’s underlying security or securities, the option strategy may underperform a portfolio that is otherwise identical to the underlying securities or equities owned by the client but did not engage in the option strategy. There is no guarantee that the option strategy will be profitable on a gross or net of fees basis.
Liquidity
There is no guarantee a secondary market in options will be liquid. If Canvas Managed Options is unable to close positions prior to expiry the risk management techniques described herein may not be implemented as described resulting in outsized losses or resulting in the sale of collateral shares.
Not a hedge
Investors selling call options have a maximum profit limited to the value of the premium received. Beyond the premium received, investors retain all the risk of the underlying portfolios and could suffer a loss of 100% of their equity holdings.
Unlimited loss
Investors selling call options accept the potential for unlimited loss as call options have no maximum value, or the risk of their shares being called away. For investors selling covered calls, their loss may be realized in the form of opportunity cost, with the possibility of their shares or ETFs being called away (and sold) at prices far below the market price of those shares or ETFs at the time of exercise.
Options and derivatives risk
Canvas Managed Options and O’Shaughnessy Asset Management offer no guarantee that any of the strategies illustrated herein, will be successful or meet their intended objectives. Market movements or events, both foreseen and unforeseen, may render any strategy unsuccessful and may result in unforeseen losses.
Options are not suitable for all investors and carry additional risks. Investors must ensure that they have read and understood the current options risk disclosure document before entering any options transactions. In addition, investors should consult with a tax, legal and/or financial advisor prior to contemplating any derivative transactions. The options risk disclosure document, “Characteristics and Risks of Standardized Options,” can be accessed at the following web address: https://www.theocc.com/Company-Information/Documents-and-Archives/Options-Disclosure-Document.