Parametric designes options strategies for large institutions like pension funds. In this case they are selling strangles to the tune of $5bn:
It is not a new strategy for the fund, which employs several systematic and rules-based volatility trading strategies, but people familiar with the activity say the fund pulled back from the market last year because of the market shock stemming from coronavirus. Now, growing confidence in the US economic recovery has teased the Gamma Hammer, alongside other investors, back to the market.
This trade is likely not to induce much volatility in the market even if markets shift a lot. Many of the institutions that use Parametrics’ strategies invoke options trades which are fully collateralized. In other words they don’t use margin.
