High-Yield Bonds: Potential income source
The fundamentals in the high yield market have greatly improved since the credit crisis of 2007-2008: balance sheets are stronger, leverage is lower and cash levels remain high.
Although high yield spreads have come down significantly from their recent highs, low spreads have historically been accompanied by prolonged periods of compelling high yield performance as corporate fundamentals improve. This causes the price of high yield bonds to rise, which can boost total return.
Convertible Bonds: Upside participation and less downside volatility
Equities / Equity Securities: Capital appreciation and income enhancement potentials
US high quality, large-cap stocks provide capital appreciation and income potential. In addition, covered call strategies pair a long position with a short-call option on the same stock. It can provide additional income from option premium and reduce exposure to equity market volatility.
From November 2000 to June 2016, the CBOE S&P 500 BuyWrite Index (BXM) participated in more than 85% of the S&P 500 Index’s upside at lower volatilities. During the 2008 Global Financial Crisis, the BXM suffered lower maximum drawdown than the S&P 500 Index (-35.81% vs. -50.95%)*.