Fate Capital is targeting the younger generation of investors, allowing them the opportunity to increase their investment income via premium collection. This is made possible by writing options contracts on their long-term portfolio, which by design also reduces overall portfolio risk and volatility.
The strategy is not new and has been used to profitably trade in bullish, bearish and neutral markets, but most funds simply overlook this strategy. Since the aim of most funds is to increase their AUM (the higher the AUM, the higher the management fees), and in turn the bigger the fund the more difficult it becomes to find liquidity in the options market. Fate Capital has no management fees and is looking to stay relatively small, while using this strategy to provide uncorrelated returns to its investors.
Overall, the options market has seen tremendous growth since the pandemic started, with many people trying their hand at investing. Investors are excited by the potential of options trading, and the abnormal profiting opportunities, however, most aren’t knowledgeable enough to trade profitably while keeping risk in check.
Haris Khurshid, Founder of Fate Capital Management, says: “While the options market has definitely seen significant growth this year thanks to the pandemic, we believe that most of it is based on FOMO. And as these new investors start to realize that options trading is not as simple as buying a cheap out-the-money call to make a quick buck, we expect them to either a) find some resources to learn, or b) find an investment vehicle which helps them do this. The potential is so great here that what we are experiencing now is just the first of many dynamic moves forward in investment management for the average investor. Especially if you look at the uptick in people opting for robo-advisors over traditional advisors, this number is expected to increase 4X by 2022.”
The appeal of Fate Capital is that it allows its investors speedier returns, instead of having them wait 3-5 years to realize returns on their investments. In this scenario there are multiple layers of profits i.e. growth in the underlying portfolio (3-5 years), dividend income from dividend paying stocks and premium income from premium collection, which can pack on another 10-20% per year.
The fund has raised ~$12 million so far and is currently accepting new investors, with a soft close approaching towards the end of the year. You can get more information and sign up here.