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SGI STEP Strategy - Short Term Equity Puts Index

Index level: 1231.143 as of 01/12/2021

Main characteristics

Bloomberg Code SGIXSTEP
Inception Date 12/10/2019
Return Type Excess Return
Currency USD
Calculated By Singapore Exchange Limited

Objective

The SGI Short Term Equity Puts Index is a short vol strategy designed to benefit from the difference in the Implied and Realized vol levels on SPX listed options through a systematic short put selling program.

Mechanism

The implementation of the strategy contains 5 steps:

1) On a daily basis, the Strategy takes a short position in the S&P 500 puts with the first, second and third listed maturity. In order to follow the liquidity distribution of short-term puts and to scale our market exposure to the prevailing volatility-regime, we turn to the levels of VIX as an indicator of the S&P price movements’ volatility.

2) Each day, we convert the current annualized VIX implied vol level to account for our options’ maturity in order to obtain the magnitude of the implied spot move over the options’ lifetime. 

3) Adjusting this volatility by a scaling factor then determines the option’s sensitivity to market-drawdowns depending on the volatility regime – this way, options are struck more OTM/ATM when volatility is elevated/bottomed.

4) From the above, we then obtain the target strike-moneyness.

5) Finally, in order to smooth execution of the replication, as well as to limit the market impact in terms of ADV, we dynamically allocate the notional for each maturity over a wider range of strikes, yet guaranteeing the TWAP bid-price (1st limit) of a single strike.  


The  SGI STEP Strategy - Short Term Equity Puts Index is the property of [the Customer Singapore Exchange Limited and its affiliates (collectively, the SGX Group Companies) each expressly excludes any guarantee, warranty, condition, term, undertaking or representation of any kind, express or implied, statutory or otherwise, in relation to the Custom Indices, the methodology and the components of a Custom Index which may include, but is not limited to, constituent level data such as futures prices, shares outstanding, investable weight factor, and fundamental data such as price/earnings ratios and/or other financial ratio, including calculation of the Custom indices (Underlying Data) or values of the Custom Indices (Index Values). In no event whatsoever shall any of the SGX Group Companies be liable or responsible for any damages or loss of any kind, even if they have been advised of the possibility of such damages or loss, whether in contract, tort (including negligence), strict liability or otherwise and whether direct, indirect, special, incidental, punitive, consequential, economic loss of any kind (including but not limited to loss of profit, loss of reputation, loss of opportunity, or lost time or goodwill), suffered or incurred by any person from the use or reliance of the Custom Indices, Underlying Data or Index Values.

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