Jay Pestrichelli

Jay Pestrichelli

CEO and Co-Founder of ZEGA Financial

What is The Hedger’s Opportunity


Why We Believe in Hedging

Overcoming smaller losses mathematically makes recovery more achievable and potentially quicker.
(i.e., downside mitigation)

Being “hedged” creates the opportunity to re-invest the losses avoided while the market is discounted.
(i.e., You’ll have the funds available to “buy low.”)

Illustrative Declines and Recovery Comparison Chart

Source: ZEGA Financial.  Hedged and Stocks graphs derived from basic math calculations illustrating  the need of smaller gains to make back smaller losses.

The Hedger’s Opportunity to Buy Markets Lower

Who doesn’t want to buy into the market at lower prices?

If a portfolio is hedged while the market materially drops and you only participated in the first 8% to 10% down, using the avoided loss allows investors to buy in at lower levels. When markets eventually rebound, it potentially could control more shares on the way back up because you were able to put ‘dry powder’ to work. All the while, you could still have hedges in place should another leg down happen.

Losing Less Means Quicker Recoveries

When you lose less, it takes less of a move to make back those losses. Lose 50%, you need 100% in gains to get back to break even. Lose 10%, it only takes an 11% gain to get back to even. A hedged equity strategy that is designed to avoid a significant amount of market downturns means you get to reinvest lower and upon a solid recovery, your recover time may be reduced.

How the Hedgers Opportunity Works at ZEGA Financial

Our hedged equity strategy uses options designed to control but a notional amount generally equal to the account value.

This provides the potential to capture upside moves in the broad S&P 500 Index. Since those instruments are limited to a maximum loss, along with our hedged fixed income, we can define a downside target of no more than 8%-10% down over the course of 12-months. If markets selloff below those levels, we can opportunistically use the avoided loss to reset the portfolio when the S&P 500 is lower in value.

This approach offers investors the ability to still capture a target of around 70% of the upside while holding the hedgers opportunity to re-establish long exposure at lower prices.

An Attractive Strategy For Retirees (and Investors Who Need Growth, but Cannot Afford 2008-Like Downside)

With many people living longer than ever, money must last longer than ever. Those nearing or in retirement cannot stand to take significant losses. They simply won’t have the accumulation time needed to work back up to prior asset levels. Hedged equity looks to limit losses to a more management amount while allowing for the potential to capture a good portion of upside in markets. Staying in the market is important and waiting in cash or bonds at current interest rates may not provide enough growth.

Hedged equity offers growth while the hedger’s opportunity provides enough optionality to add to this bucket when markets are lower. Stay Invested. Stay Hedged.

Learn more about ZHDG here.

And watch our CEO, Jay Pestrichelli chat with Jill Malandrino on Nasdaq’s Trade Talks here.

More to explorer

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, click hereFor the Fund’s Top 10 Holdings, please click hereRead the prospectus or summary prospectus carefully before investing.


Equity Market Risk. The equity securities underlying the Fund’s option investments may experience sudden, unpredictable drops in value or long periods of decline in value.

Derivatives Risk. The Fund invests in options, which are a form of derivative investment. Derivatives have risks, including the imperfect correlation between the value of such instruments and the underlying assets or index; the loss of principal, including the potential loss of amounts greater than the initial amount invested in the derivative instrument; and illiquidity of the derivative investments. The derivatives used by the Fund may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss.

As with all ETFs, Shares may be bought and sold in the secondary market at market prices. Although it is expected that the market price of Shares will approximate the Fund’s NAV, there may be times when the market price of Shares is more than the NAV intra-day (premium) or less than the NAV intra-day (discount) due to supply and demand of Shares or during periods of market volatility. 

The Fund may invest in fixed income securities directly or through ETFs or other investment companies. Fixed income securities are subject to interest rate risk (discussed further herein), call risk, prepayment and extension risk, credit risk (discussed further herein), and liquidity risk. Interest rates may go up resulting in a decrease in the value of the fixed income securities held by the Fund. Credit risk is the risk that an issuer will not make timely payments of principal and interest. Because the Fund is “non-diversified,” it may invest a greater percentage of its assets in the securities of a single issuer or a smaller number of issuers than if it was a diversified fund. As a result, a decline in the value of an investment in a single issuer or a smaller number of issuers could cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio.

References to other securities is not an offer to buy or sell.

New Fund Risk. The Fund is a recently organized management investment company with no operating history.

The fund is distributed by Foreside Fund Services, LLC
Launch & Structure Partner: Tidal Financial Group