Korean asset managers are ramping up derivatives-driven ETF strategies from covered calls to synthetic protective puts as demand for yield and volatility management fuels rapid market growth, supported by regulatory easing and expanding institutional interest.
When Kiwoom Investment Asset Management planned an exchange-traded fund (ETF) launch in South Korea to protect against market downturns through option-based strategies, the Seoul-based issuer wrestled with ideas. The high cost of option premiums using put options for managing covered call ETFs, the buffer ETFs' long-dated maturities and the need to explain the complexity made head of ETF management Kyung-jun Lee and his team hesitate. But the idea of embedding option-based portfolio insura