Markets have been volatile for much of 2022 and this year, thanks to inflation, U.S. Federal Reserve interest rate hikes and the banking crisis. Tech stocks were in bear territory for much of last year, but have been a bright spot so far in 2023 despite the uncertainty. Ben Rogoff, a portfolio manager at Polar Capital with 25 years of investing experience, has a strategy for mitigating risk when investing in growth stocks such as tech. He told CNBC Pro Talks last week that when it comes to big tech stocks such as Apple and Microsoft , his firm uses single stock call options to “try and ameliorate some of the upside risks” associated with such stocks. “In the core technology funds that we manage … we do use a modest amounts of index options to try to reduce the sort of inherently higher index beta that comes with investing in growth stocks,” Rogoff said. A call option is a contract to buy a stock at a certain price at a set time in the future. The option value increases if the stock price rises above that set price. “We’re not looking to use any of these derivative products to try to create … returns,” he said, referring to call options, which are a form of derivative. “It’s all about trying to more efficiently manage the portfolio.” In a note earlier this month, Goldman also recommended that clients buy call options on those two tech titans , saying that they’re attractively priced and its analysts see positive signs in their earnings reports. Rogoff added, “So that’s what we’ve been doing for a number of years and obviously, we’ve had periods where it works well, periods when it doesn’t work well. And so typically, when volatility is lower then we find the … risk reward associated with doing that type of buying more attractive, so that’s all things being equal.” Other markets for tech Rogoff said although the U.S. is the dominant market for technology, he’s also looking elsewhere. “I mean, the US is the dominant market for technology … and of course, we you know, we look to other markets as well to augment that exposure,” he said. One of those markets is Japan — for exposure to robotics and automation, according to Rogoff, who added his firm also has exposure “continuously” to China. — CNBC’s Michael Bloom contributed to this report.
