AdvisorShares STAR Global Buy-Write ETF

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 month end performance, please click

October 2018 Portfolio Manager Review

Category Review

  September YTD
VEGA NAV* -5.17% -1.32%
MSCI World Index -7.34% -2.31%
BXM Index -5.46% 0.95%
Int. Gov’t/Credit Bond -0.14% -0.90%
Policy Benchmark -4.83% -0.42%

Policy Benchmark comprises the following allocation:VEGA Policy Benchmark is a blended benchmark of 37.5% MSCI World Index, 37.5% CBOE S&P 500 Buy/Write Index and 25% to the Barclays Intermediate Government Corporate Index.

Portfolio Review

October 2018 was a challenging month across the board for markets collectively. As such, VEGA posted a return of -5.17% during October. The indexes that make up the VEGA ETF Policy Benchmark were also down drastically for the most part during the month of October. CBOE S&P 500 BuyWrite Index fell -5.46% during October. Bloomberg Barclays Intermediate U.S. Gov/Credit Bond was only slightly negative, posting a return of -0.14%. MSCI AC World Index fell dramatically by -7.34%.

For the month, VEGA’s Policy Benchmark was down -4.83%.


October struggled to find positive returns. The positions that netted positive contribution during the month of October were our Protective Puts, of which there were two rounds. VEGA ETF bought Protective Puts October 3rd that were 20% Out-of-the-Money and covered 20% of the portfolio. The first round of Protective Puts were sold October 12th for almost 3x their initial cost and added 0.2% positive return to the VEGA ETF. The second round of Protective Puts were purchased October 22nd and sold a week later on October 29th for almost twice their initial cost. The second round of Protective Puts added 0.1% positive return.


There were major detractors from the VEGA ETF performance during October. The most severe of which were:

iShares Russell 2000 ETF






SPDR S&P 500 ETF Trust



SPDR Bloomberg Barclays Convertible Securities ETF




Top 10 Holdings
Ticker Security Portfolio Weight %



VEGA ETF had a busy month during October 2018. Here is a recap of trades initiated during the period:

10/3/2018 – Purchased Protective Puts for 20% Out-of-the-Money and 20% Notional Coverage.

10/8/2018 – Replaced EFA Covered Calls sold in September with new Covered Calls expiring the month, effectively doubling the expected premium on the position.

10/11/2018 – Replaced SPY Covered Calls sold in September with new Covered Calls expiring the month, effectively doubling the expected premium on the position and initiated a Volatility-Based Reinvestment (VBR) to repair SPY position after market drop.

10/12/2018 – Sold Protective Puts for nearly 3x what they were purchased for and left the proceeds in cash.

10/22/2018 – Replaced expired Covered Calls on EFA and SPY, also purchased new Protective Puts for 20% Out-of-the-Money and 20% Notional Coverage.

10/29/2018 – Sold Protective Puts for nearly 2x what they were purchased for and left the proceeds in cash.


October, once again, worked its black magic on world markets, pushing major indices into negative territory for the year and fanning concern that history’s longest bull market may finally be extinguishing itself. The Federal Reserve Bank held steady to its tighter-money rubric despite mixed signals from the markets and some industries. The U.S. economy, meanwhile, continued to grow at robust levels and unemployment rates remained at their lowest in generations.

Otherwise, global growth seems to have peaked—at least according to the International Monetary Fund (IMF)—as Europe, emerging markets, and China continued to struggle with rising interest rates and reduced demand. As the year lurches to a close, the fallout from U.S.-led trade feuds had not been clarified.


At the same time, FactSet and Bank of America revealed that companies that reported positive quarter earnings surprises were punished by the market—their stock prices decreased by an average of 0.5% two days before the earnings release through two days after the release. At the same time, companies that reported negative earnings surprises for the quarter experienced an average price decrease of 3.5%, two days before the earnings release through two days afterward. While such penalties are hardly surprising, the lack of rewards for earnings per share and sales beats is common in the latter periods of late-stage bull markets. Or, as Bank of America strategist Savita Subramanian put it, “This suggests that the good news is priced in.”

On the fixed-income side, U.S. Treasury yields tumbled in late October due to a decline in inflation expectations—despite a 25% surge in oil prices—and a quest for safe havens amid plunging stock prices. Such maneuvering, according to ZeroHedge, was in sympathy with a sinking University of Michigan inflation outlook to record lows and a Bloomberg report that the five-year breakeven rate, which represents bond investors’ view on the annual inflation rate through 2023, dropped Friday to 1.88%, the lowest since January of this year.

Source: yCharts

“The Fed may have entered restrictive territory by a full quarter-point hike,” ZeroHedge wrote, adding “inflation and growth expectations reflected in commodity prices suggest that 10Y Treasury yields should be dramatically lower from here.”

The ZeroHedge note followed a warning from JPMorgan Asset Management that spikes in volatility may spook investors into boosting allocation to bonds to cushion their portfolio amid mounting risks to global growth.

“It’s going to be so useful if things start to get out of control,” Kerry Craig, a global markets strategist at JPMorgan Asset Management, said at a briefing. “Think about the drag that driving with your handbrake creates, and that’s what bond markets are viewed as at the moment.”

The burden of servicing the U.S. budget nearly doubled in October, according to the U.S. Treasury, to $779 billion, an all-time high. The increase, attributed largely to tax cuts and defense outlays, was on track to reach $895 billion in November—$222 billion or 39% more than the previous year. Meanwhile, the U.S. federal debt increased by $1.80 trillion in fiscal year 2018, according to data released by the Treasury Department. The figure marks the eighth fiscal year in the last eleven in which the debt increased by at least one trillion dollars and was the sixth largest fiscal-year debt increase in U.S. history. The national debt now totals $21.50 trillion and counting.

Despite concerns about the rising cost of money, a recent report showed that investors have the lowest amount of cash in their investment accounts in this bull market, according to Real Investment Advice. “Individual investors drew down cash balances at brokerage accounts to record lows as the S&P 500 surged. For example, cash as a percentage of assets among Charles Schwab Corp. clients in August fell to 10.4 percent, matching the level in January that marked the lowest since at least 2004.”

U.S. Economy

The Bureau of Labor Statistics announced that October payrolls soared by 250,000, just shy of the highest Wall Street estimate and more than double last month’s downward revised 118,000. At the same time, August was revised up from 270,000 to 286,000. After revisions, job gains have averaged 218,000 over the past 3 months.

What’s more, the economy expanded at a 3.5% pace in the third quarter thanks to consumer spending, restocking of businesses inventories, and governments expenditures, marking the strongest back-to-back quarters of growth since 2014, according to the Commerce Department.

According to the U.S. Department of Commerce Consumer spending, which accounts for about 70% of the economy, unexpectedly accelerated by 4%—the strongest showing since 2014—while the 0.8% gain in nonresidential business investment was the weakest in almost two years. Inventories provided the biggest contribution since early 2015, while the drag from trade duties was the largest in 33 years. Government spending rose by the most since 2016, while personal income rose by just 0.2% month-on-month versus 0.4% for August and expectations of a 0.4% rise.

The Conference Board Consumer Confidence Index® increased again in October, following a modest improvement in the previous month. The Index stood at 137.9, up from 135.3 in September. In contrast, the University of Michigan sentiment survey weakened modestly to its final print of 98.6. Optimism among low-income Americans tumbled, the survey reported, and increases in home and vehicle prices, rising interest rates, and decreases in the pace of growth in inflation-adjusted incomes have especially dimmed prospects for home and vehicle sales.

The housing market, a key source of growth, continued to deteriorate. Home-price gains slowed in August to the slowest pace since 2016, as high borrowing costs and property values limited buyer interest, according to S&P CoreLogic Case-Shiller. The National Association of Realtors (NAR) reported that existing-home sales fell 3.4% from August to a seasonally adjusted rate of $5.15 million in September. The median existing-home price for all housing types in September was $258,100, up 4.2% from September 2017, marking the 79th straight month of year-over-year gains.

Source: ZeroHedge

In response, Lawrence Yun, NAR chief economist, said rising interest rates have led to a decline in sales across all regions of the country. “This is the lowest existing home sales level since November 2015,” he said, adding that “decade’s high” mortgage rates are preventing consumers from making quick decisions on home purchases.

American U.S. Manufacturing and Services Purchasing Managers’ Index (PMI) surprised on the upside in the Flash October prints as the Composite Output Index, Services Business Activity and Manufacturing PMI scored highs of 3-months, 2-months and 5-months, respectively.

Source: yCharts

Inflation was a challenge, however. The cost inflation accelerated to its sharpest since September 2013 due to trade tariffs as well as rising fuel bills and higher borrowing costs. At the same time, factory gate charges continued to increase at one of the fastest rates since the first half of 2011.


The IMF issued its report on global growth downgrades, led by China, which is expected to slow by 20bps to 6.2%. Emerging market and developing economies’ growth was downgraded 20bps and 40bps in 2018 and 2019, respectively, as the report warned that growth in major economies has peaked.

Growth in the eurozone, meanwhile, fell to its slowest pace in more than four years, according to Bloomberg. Following a rally sparked after Moody's cut Italian debt ratings less than the markets feared (one notch above junk—Baa3), the euro weakened on the news that German business activity slowed to its lowest rate in nearly four years as France’s manufacturing PMI index hit a 25-month low.

The Bank of Japan held interest rates at -0.1% while trimming its inflation forecasts. It also vowed to purchase 10-year Japanese government bonds to maintain the yield at "around zero percent." In doing so, Tokyo will drift further behind the rest of the developed world in policy normalizing in its battle to stoke inflation in line with its 2% target.

China was obligated to concede that its economy is slowing at a faster pace than recent forecasts after the National Bureau of Statistics (NBS) reported that China’s manufacturing PMI fell to 50.2 in October—down from 50.8 in September and below estimates of 50.6. According to ZeroHedge, it was also the lowest number since July 2016 with almost all sub-indexes showing weaker growth momentum. The NBS non-manufacturing PMI also missed, printing at 53.9 and declining from 54.9 due to the weaker services PMI.


Very Truly Yours,

David YoungDavid Young, CIO of Partnervest Advisory Services

Portfolio Manager of VEGA

September 2018 Commentary

August 2018 Commentary

Information is from sources deemed to be reliable, but accuracy is not guaranteed.
*Performance and pricing data used for VEGA ETF is based on the indicated value of the ETF at the close of the day.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus and summary prospectus which can be obtained by visiting Please read the prospectus and summary 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 to change. The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or anytime thereafter.

The views in this material were those of the Portfolio Manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.


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.

The Cboe S&P 500 BuyWrite Index (BXM) is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index.

he MSCI World Index is a market cap weighted index which captures large and mid cap representation across 23 Developed Markets countries.

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. An option premium is income received by an investor who sells or “writes” an option contract to another party. A 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. A 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. A protective put is an option strategy which entails buys 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). Exercising an option means to put into effect the right specified in a contract.

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.