By incorporating the Volatility approach, the Hybrid Strategy provides a built in hedge or risk management that the Impulse Strategy alone doesn’t naturally provide. Due to the fact that positions in the Volatility Strategy typically have both Calls AND Puts in every position, this means the portfolio has a built-in downside hedge. If there is an unexpected large move in the market, particularly to the downside, Volatility Strategy will still profit. This provides a layer of additional risk management for the Hybrid Strategy.

With the inclusion of Impulse Strategy trades, the Hybrid Strategy benefits from the profitability of directional trades. Typically it uses option positions with either puts OR calls in them. Because this strategy is picking a direction, that is, we aren’t buying options to profit from both upside or downside moves, these positions are cheaper to enter and therefore more profitable when they are winners. The additional profit in these directional trades helps lift the overall performance of the combined strategies together.