Rising levels of correlation among asset classes coupled with the perennial low rates for fixed income are forcing asset allocators to be more creative in their pursuit of diversification. Some large institutional investors with long-term liabilities to match have begun to consider using options, a direct means of managing the return distribution of equities.

However, options trading can be misunderstood, and therefore overlooked, meaning that investors are missing out on a means of diversification.

It is worth considering where the value of these strategies lie as portfolio diversifiers.

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