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Are Equity Put-Write ETFs Working?

Posted in Equity Options

Is systematically selling equity put options, as implemented by exchange-traded funds (ETF), attractive? To investigate, we consider four equity put-write ETFs, two dead and two living:

  1. US Equity High Volatility Put Write (HVPW) - oriented toward individual stocks (dead).
  2. ALPS Enhanced Put Write Strategy (PUTX) - index-oriented (dead).
  3. WisdomTree CBOE S&P500 PutWriteStrat (PUTW) - index-oriented (living).
  4. BMO US Put Write (ZPW.TO) - oriented toward individual stocks (living).

Because available samples are short, we focus on average daily return, standard deviation of daily returns and sample period cumulative return. For the living ETFs, we include maximum drawdowns (MaxDD) based on daily data. We consider SPDR S&P 500 (SPY) and CBOE S&P 500 PutWrite Index (PUT) as benchmarks. Using daily returns for the four ETFs as available through early September 2018, and contemporaneous daily returns for SPY and PUT, we find that:

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