CAZ Covered Combo Fund

  • Type: Liquid Fund
  • Minimum Investment: $500,000
  • Strategy: Equity Alternative
Executive Summary

Why This Fund?

The CAZ Covered Combo Fund (“CCO”) provides direct exposure to our major themes via positions in the liquid markets.
For the first time since the Global Financial Crisis, markets dislocated in a significant way  in 2020 and volatility has remained elevated. We believe investing in major themes that have significant tailwinds, while profiting from the spike in volatility, will provide superior returns when compared to plan vanilla equity investments. CCO is designed to outperform the S&P 500 on a risk-adjusted basis. The Fund’s methodology utilizes long equity positions that are based on themes that we identify, while applying our 30+ years of options experience overlaying positions with Covered Combos. Additional highlights include:
  • Target 10% annual cash flow yield from option premiums and dividends
  • 10-20 thematic positions diversified across theme, sector, capitalization and geography
  • Opportunity to acquire very attractive assets at material discounts to early 2020 prices
Purpose & Objectives
  • The CAZ Covered Combo Fund seeks to outperform the S&P 500 on a risk-adjusted basis by utilizing long equity positions that are based on themes that we identify, while utilizing our 30+ years of options experience overlaying positions with Covered Combos
  • The Fund will aims generate an annual cash flow yield from option premiums and dividends of at least 10%
  • Investors may enter and redeem with weekly liquidity
  • The Fund typically consists of 10-20 thematic positions, diversified across theme, sector, capitalization and geography
  • Investors have access to full transparency of all portfolio positions
Why Sell Options?
For the first time since the Global Financial Crisis, volatility has skyrocketed:
  • This elevated volatility creates the opportunity to collect very high option premiums by selling options
  • It is estimated more than 75% of all options held to expiration end up expiring worthless
  • Put option premiums are very much like insurance premiums, whereby the buyer attempts to protect him or herself from a potential adverse event and is fully expecting to lose money on the cost of that insurance (homes, cars, etc.)
  • Call option premiums are very much like gambling, where the buyer typically is speculating on a specific outcome
  • Investors can earn income, and protect their downside, by collecting option premiums from speculators similar to the house vs. the gambler, and from those purchasing portfolio insurance
Covered Combos
According to a frequently cited research publication*, Covered Combos typically produce higher average returns when compared to simple stock ownership, in 90% of tested results. The advantages of the Covered Combo are numerous, but the primary reasons they are utilized are:
  • The receipt of two different option premiums, both of which benefit from the natural time decay of options
  • Immediate receipt of the premiums reduces the cost of the position, leading to higher percentage returns based on no change in the underlying security
  • The proceeds from the option premiums create significantly lower break-evens for the position, compared to simple ownership
  • If the investor is required to purchase more of the security as a result of the Put being exercised they are buying more of a security they already like, at a material discount to their original purchase
  • The outperformance band of a Covered Combo position can be extremely large, providing for a much higher probability of outperformance
  • The empirical data clearly shows the propensity of Covered Combos to outperform simple security ownership
  • This is logical, because of the immediate advantage that is received from the sale of multiple options that will lose 100% of their time value when they reach expiration
*Source: The Performance of Options-Based Investment Strategies: Evidence for Individual Stocks During 2003─2013 (Dr. Michael L. Hemler, Notre Dame and Dr. Thomas W. Miller, Jr., Mississippi State)
Sample Position
For a Covered Combo, the investor owns the security and sells BOTH a Call and a Put against that position, which obliges the investor to sell the security at a set price and to be willing to buy more of the security at a set price, both for a specific period of time.
  • This illustration compares the results of a simple purchase of JPM at $85.08 to a position created by the investor selling BOTH the JPM Jan 70 Put for $12.96* and the JPM Jan 100 Call for $9.99
  • The dotted blue line illustrates the profit/loss of simple stock ownership
  • The black line illustrates the profit/loss curve of the covered combo
  • The green shaded area represents prices at which the covered combo outperforms simple stock ownership


  • OBJECTIVE: Capital appreciation with significant cash flow
  • MINIMUM INVESTMENT: $500,0001 (Qualified money accepted)
  • SUBSCRIPTIONS: Accepted weekly from Accredited Investors
  • MANAGEMENT FEE: 0.75%1,2
  • REDEMPTIONS: Weekly with 3 business days notice
  • K-1 TIMING: Expected late spring
  • ATTORNEY: Jackson Walker LLP
  • AUDITOR: Deloitte & Touche LLP
  • ADMINISTRATOR: PartnersAdmin LLC

1Smaller amounts may be accepted at a different fee structure.

2Breakpoints may be available for larger investments.

1 Smaller amounts may be accepted.
2 Breakpoints may be available for larger investments.

This summary is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness. Offers of a limited partnership interest in CAZ Covered Combo Fund, L.P. will be offered only to accredited investors pursuant to a Private Placement Memorandum. This summary does not contain a description of the risks of an investment in the Partnership. A copy of the Private Placement Memorandum and related subscription documents is available to accredited investors from CAZ Investments, One Riverway, Suite 2000, Houston, TX 77056.
This summary is not an advertisement and is not intended for public use or distribution and is intended exclusively for the use of the person to whom it has been delivered by CAZ Investments. This presentation is not to be reproduced or redistributed to any other person without the prior consent of CAZ Investments. To the extent of any inconsistency between this summary and the Private Placement Memorandum, the terms of the Private Placement Memorandum control. The information contained in this summary reflects CAZ Investments’ current views at the time of publishing, but it should be expected that the information may no longer be accurate in the future. CAZ Investments reserves the right to change any information in this summary without notice but disclaims any obligation to update this summary to reflect subsequent developments.
Historical examples included in this summary do not, nor are they intended to, constitute a promise of similar future results. Future market views by CAZ Investments may vary significantly from the historical examples presented herein and no one receiving this summary should assume that CAZ Investments will be able to replicate successful views in the future or that CAZ Covered Combo Fund, L.P. will be a profitable or suitable investment.
Inquiries regarding performance or any other questions should be directed to CAZ Investments at 713-403-8250.