VEGA: 3rd Quarter 2022 Portfolio Review

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click

Portfolio Update

​The 3rd Quarter 2022 started off with a rally in the S&P 500 Index, just to give it all up by Sept. 30, 2022, ending down 4.88% for the quarter and down -23.78% on the year. The MSCI All Country World Index, a proxy for international equities, was down -6.82% for the quarter. The U.S Aggregate Bond Index, also not spared from the third quarter carnage, was down -4.75%. The CBOE S&P 500 Buy Write Index (BXM Index) was down -7.59% while VEGA returned -6.24% during the 3rd Quarter.

Top Holdings

Ticker Security Description Portfolio Weight %
TIP iShares TIPS Bond ETF 2.48%

As of 09.30.2022. Cash not included.


We were very active during the 3rd quarter due to the increase in market volatility.

Covered Calls: July’s market action required us to close out our covered call position early in August, as the summer bear market rally gained steam. Our September and October calls were different. Due to the downward pressure in stocks, we were able to take advantage of the volatility by selling and closing calls multiple times to lock in gains for these contracts.

Tactical Shifts: We increased our allocation into GOVT and EFA with the market volatility, while reducing our exposure to TIP.

Volatility-Based Reinvestment (VBR): In August, we initiated a rebalance to take advantage of the dip in the markets. Also in September, we took advantage of the increased volatility by reinvesting 1/3 of our accumulated cash back into the market.

Market Outlook


All three major equity indices ended the third quarter at new 2022 lows. The Dow Jones Industrial Average was the final of the three to breach its bear market threshold for the year, ending well below 30,000. During the September Federal Open Market Committee (FOMC) meeting, the Federal Reserve (Fed) agreed to raise interest rates by 75 bps (0.75%). The chart that summarizes the FOMC’s outlook for the federal funds rate, called the “dot plot”, suggested that members expect another 125 bps (1.25%) of hikes by year end.1

The likelihood of a soft landing for the economy is low, but the depth and long-term impact of a potential recession remains unknown. Many of our asset manager partners expect a long but shallow recession.

Q3 Market Returns2

Index Total Returns Sept  Q3  YTD  1 Year  3 Year  5 Year  10 Year 
S&P 500 Index TR -9.21 -4.88 -23.87 -15.47 8.16 9.24 11.70
DJ Industrial Average TR -8.76 -6.17 -19.72 -13.40 4.36 7.42 10.45
NASDAQ Composite TR -10.44 -3.91 -32.00 -26.25 10.63 11.25 14.22
Russell 2000 Index TR -9.58 -2.19 -25.10 -23.50 4.29 3.55 8.55
MSCI Emerging Markets Index GR -11.67 -11.42 -26.89 -27.80 -1.71 -1.44 1.42
MSCI EAFE Index GR -9.31 -9.29 -26.76 -24.75 -1.38 -0.36 4.15
Bloomberg US Aggregate Bond Index TR -4.32 -4.75 -14.61 -14.60 -3.26 -0.27 0.89

As of 9/30/2022. Returns shown are total returns of indices. Returns over one year are annualized. It is not possible to invest direction in an index.

Volatility persisted in September, with the CBOE Volatility Index (VIX) hitting its highest level since mid-June.3 The VIX tracks the 30-day implied volatility of the S&P 500 Index and is a good gauge of the level of fear among investors.

While much remained the same in terms of the war in Ukraine, COVID-19, and inflation, this month the overwhelming market driver was higher interest rates and an increasingly likely hard landing (i.e., recession) for the economy. Markets reacted negatively to the prospect of additional rate hikes over the foreseeable future, with the S&P 500 Index and the Dow Jones Index ending the month down 9.21% and 8.76%, respectively. With interest rate expectations rising (more on that later), equity forecasts have been subsequently slashed by many asset managers – as higher interest rates mean higher borrowing costs and potentially compressed profitability for companies.

Worries intensified following an announcement that Russia’s Gazprom would shut down the Nord Stream 1 gas pipeline for a few days this fall, causing many to speculate that Moscow would completely shut off gas to Europe.4 News of a gas leak out of the Nord Stream 2 pipeline then led to further concerns about Russian exports.5

In response, the new U.K. Prime Minster Liz Truss announced the country’s largest tax cuts in decades, spooking investors and sending the pound to an all-time low against the dollar.6 Shortly thereafter, the government then backtracked on part of its initiative, including ditching a plan to cut the 45% top rate of income tax.7

Bond markets have offered no reprieve for investors as bond yields have risen rapidly with the prospect of additional, larger interest rate hikes by the Fed in 2022. The Bloomberg US Aggregate Bond Index had a dismal month, falling 4.32% and year-to-date closing out down 14.61%. Stock and bond correlations are at their highest since the late 1990’s, even higher than during the global financial crisis of 2008-2009.8

The Fed and Rates

While most expected the Fed to raise rates by 75 bps (0.75%) in September, it was the hawkish language used by Fed Chairman Jerome Powell and the significant increase to the fed funds rate outlook that sent markets tumbling.9 The Fed has maintained its commitment to bringing inflation back down to their 2% goal, which will require ongoing monetary policy from interest rate hikes and balance sheet reductions.

The dot plot from the September FOMC meeting showed that members are expecting the federal funds rate to end this year at 4.4%, up from 3.4% in June when FOMC projections materials were last submitted. The Fed would have to hike rates by another 125 bps (1.25%) this year to fully realize such projections. The current FOMC projections show that the federal funds rate will be even higher in 2023 at 4.6%, before finally coming down to 3.6% in 2024.1

Thank you for your continued trust in VEGA.



Ken Hyman
CreativeOne Wealth
AdvisorShares STAR Global Buy-Wrtie ETF (VEGA) Co-Portfolio Manager

Past Manager Commentary


  1. US. Federal Reserve, September 21, 2022.
  2. Data from Morningstar unless otherwise specified. Returns over one year are annualized.
  3. CNBC, September 26, 2022.
  4. CNN August 29, 2022.
  5. Reuters, September 26, 2022.
  6. CNBC September 26, 2022.
  7. Wall Street Journal October 3, 2022.
  8. Alliance Bernstein, August 26, 2022.
  9. US. Federal Reserve, September 21, 2022.

Information is from sources deemed to be reliable, but accuracy is not guaranteed.


The Barclays Capital U.S. Intermediate Government Bond Index measures the performance of U.S. Dollar denominated investment grade U.S. corporate securities that have a remaining maturity of greater than one year and less than ten years.

Beta measures the sensitivity of an investment to the movement of its benchmark. A beta higher than 1.0 indicates the investment has been more volatile than the benchmark and a beta of less than 1.0 indicates that the investment has been less volatile than the benchmark.

The Bloomberg Aggregate Bond Index broadly tracks the performance of the U.S. investment-grade bond market. and is comprised of investment-grade government and corporate bonds.

The CBOE S&P 500 BuyWrite Index is designed to measure the total rate of return of a hypothetical “buy-write”, or “covered call”, strategy on the S&P 500 Index.

The Bloomberg Aggregate Bond Index broadly tracks the performance of the U.S. investment-grade bond market.
The index is composed of investment-grade government and corporate bonds.

The Consumer Sentiment Index is a monthly survey of U.S. consumer confidence levels conducted by the University of Michigan. It is based on telephone surveys that gather information on consumer expectations regarding the overall economy.

covered call option involves holding a long position in a particular asset, in this case shares of an ETP, and writing a call option on that same asset with the goal of realizing additional income from the option premium.

Delta represents the rate of change between an option’s price and a $1 change in the underlying asset’s price. In other words, the price sensitivity of an option relative to the underlying.

The Dow Jones Industrial Average is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange and Nasdaq.

Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices.

The MSCI All Country World Index (ACWI) is is an unmanaged free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets.

The MSCI EAFE Index is a broad market index of over 900 stocks located within 21 countries in Europe, Australasia, and the Middle East and is often used as a benchmark for global developed market equities.

The MSCI Emerging Markets Index is used to measure the financial performance of mid- and large-cap companies in fast-growing economies in 25 countries throughout the world. 

The Nasdaq Composite Index is a market capitalization-weighted index of more than 3,700 stocks listed on the Nasdaq stock exchange which is heavily weighted to the technology sector.

An option is a privilege, sold by one party to another that gives the buyer the right, but not the obligation, to buy (call) or sell (put) a stock at an agreed upon price within a certain period or on a specific date.

Exercising an option means to put into effect the right specified in the option contract.

An option premium is income received by an investor who sells or “writes” an option contract to another party.

A call option is considered Out Of The Money when the call option’s strike price is higher than the prevailing market price of the underlying stock. A put option is considered Out Of The Money when the put option’s strike price is lower than the prevailing market price of the underlying stock.

protective put is an option strategy which entails buying shares of a security and, at the same time, enough put options to cover those shares. This can act as a hedge on the invested security, since matching puts with shares of the stock can limit the downside (due to the nature of puts).

The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

put option is a contract that gives the owner of the option the right to sell a specified amount of the asset underlying the option at a specified price within a specified time.

The Russell 2000 Index refers to a stock market index that measures the performance of the 2,000 smaller companies included in the Russell 3000 Index and is widely regarded as a bellwether of the U.S. economy because of its focus on smaller companies that focus on the U.S. market.

The S&P 500 Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stocks. 

A short position is the sale of a borrowed investment with the expectation that it will decline in value.

Theta is a measure of the rate of decline in the value of an option due to the passage of time.

Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.

Implied Volatility is the estimated volatility of a security’s price. In general, implied volatility increases when the market is bearish and decreases when the market is bullish. This is due to the common belief that bearish markets are more risky than bullish markets.

The Volatility Index (VIX) is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge”. The VIX is a contrarian sentiment indicator that helps to determine when there is too much optimism or fear in the market.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus, a copy of which may be obtained by visiting Please read the prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. Other Fund risks included: allocation risk; derivative risk; early closing risk; Exchange Traded Note risk; liquidity risk, market risk; trading risk; commodity risk; concentration risk; counterparty risk; credit risk; emerging markets and foreign securities risk; foreign currency risk; large-, mid- and small- cap stock risk. Please see the prospectus for detailed information regarding risk. The Fund is also subject to options risk. Writing and purchasing call and put options are specialized activities and entail greater than ordinary investment risk. The value of the Fund’s positions in options fluctuates in response to the changes in value of the underlying security. The Fund also risks losing all or part of the cash paid for purchasing call and put options. The Fund may not be suitable for all investors.

Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times. 

Holdings and allocations are subject to risks and change.

The views in this commentary are those of the portfolio manager and many not reflect his views on the date this material is distributed or any time thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.