Simple Stock Index Option Strategies

Posted in Equity Options


Do simple stock index option strategies (stock-covered calls, cash-covered puts and collars) outperform the underlying index? To investigate, we examine first the performance of the CBOE S&P 500 BuyWrite Index (BXM), the CBOE S&P 500 PutWrite Index (PUT) and the CBOE S&P 500 95-110 Collar Index (CLL), with the S&P 500 Total Return Index SPTR) as a benchmark. Since these series are modeled indexes rather than tradable assets, we then examine the relatively short records of exchange-traded funds (ETF) and notes (ETN) designed to track BXM, iPath CBOE S&P 500 BuyWrite Index ETN (BWV) and PowerShares S&P 500 BuyWrite (PBP), with SPDR S&P 500 (SPY) as a benchmark. Using end-of-month levels/total returns for SPTR, BXM, PUT and CLL since June 1986, and for SPYBWV and PBP since December 2007 (limited by inception of PBP), all through August 2015, we find that: (more…)

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