Complex Annuities for a Complex Era

June 1, 2017 by Kerry Pechter

When sophisticated investors hold long positions in equities but worry about market volatility, they can create “collars” with out-of-the-money puts and calls. The options establish a floor under potential losses on the investment and a ceiling on potential gains.

Indexed variable annuities are packaged products that give investors a similar way to hedge their bets. These accumulation-oriented products, available since 2011, offer more upside (but less protection) than indexed annuities and more protection (but less upside) than variable annuities.

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Originally Posted at Retirement Income Journal on June 1, 2017 by Kerry Pechter.