Options and Leveraged ETFs
Option-income strategies, hedging with options, and how leveraged and inverse ETFs behave over time.
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- Stock Price Pinning at Options Expiration? Stock prices cluster at option strike prices on expiration dates, with optionable stocks altered by average 16.5 basis points via hedge rebalancing and manipulation (2004 study; aggregate $9B market cap shifts).
- Predictive Power of Put-Call Ratios Put-call ratios show weak, inconsistent correlations with SPY future returns (R-squared 0.006 for best performer; 1995-2013; CBOE/ISE total/index/equity ratios over 5-63 day horizons; 68-trade strategy underperformed buy-and-hold).
- Performance of CBOE PutWrite Indexes PUT and WPUT underperformed S&P 500 Total Return Index (6.6% and 5.6% vs 7.1% annual compound returns; Feb 2006–Dec 2015; cash-secured put selling monthly/weekly; gross returns before trading costs).
- Timing and Hedging the Roll Return for VIX Futures VIX futures contango/backwardation predicts exploitable returns; hedged strategy generated 53% annual compound return (2006-2011; short VIX futures in contango, long in backwardation, hedged with E-mini S&P 500 futures).
- Intraday Versus Overnight Option Returns S&P 500 delta-hedged options show negative overnight returns (-1.0%) and positive intraday returns (+0.3%), driving the overall -0.7% risk premium (Jan 2004–Apr 2013; bid-ask midpoints; gross returns).
- Front-running Leveraged ETFs at the End of the Day? Front-running leveraged ETF rebalancing generated 104% cumulative gross return (0.60% per trade; Jun 2006–Jul 2011; buy SSO/SDS at 2:45pm on 2%+ market moves, sell at close; profits concentrated in late 2008).
Option income
25 articlesCovered calls, buy-writes, put writing and option-income funds.
- Are Equity Index Covered Call ETFs Working? Five equity covered call ETFs (PBP, XYLD, QYLD, FTHI, RYLD) have lower average monthly returns and CAGRs than their BuyWrite benchmarks (inception–April 2026; monthly dividend-adjusted data; descriptive, not a trading…
- Are Equity Put-Write ETFs Working? Equity put-write ETFs underperformed SPY (average CAGR 5.5% vs 14.3%; MaxDD -20% vs -24%) and PUT (CAGR 7.8%), with three of six beating PUT (equal-weighted six ETFs, as available through…
- Put Option Buyers Predict Stock Market Returns? Put Option Trading Efficiency (POTE, slope of put open interest versus a mispricing score from 11 anomalies) is statistically significantly negatively associated with next-month U.S. stock excess returns (slope -1.51;…
- Beat the Market with Covered Calls? Monthly covered calls on the S&P 500 Index beat it by a gross 0.2% only at 1.2%-2.4% target annualized option yields, and trailed it at higher yields (Jan 1999-Jun 2023;…
- Sensitivity of Put-Spread Collar Performance to Rebalancing Schedule JAN/APR/JUL/OCT (JAJO) put-spread collars on the S&P 500 beat FEB/MAY/AUG/NOV (FMAN) by 1% gross annualized (40% cumulative), with 0.8% lower volatility; rebalance timing luck is about 2.9% annually (2008–2022; gross…
- Updating Evidence on Equity Index Covered Calls and Protective Puts Covered calls on SPY outperformed SPY buy-and-hold (up to 0.49% monthly gross advantage; Mar 1993–Sep 2020; monthly at-expiry options, 5% OTM to 2% ITM; Black-Scholes pricing), while protective puts underperformed.
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- Sell Equity Index OTM Put Options and ATM Straddles? Does accounting for realistic trading frictions support beliefs that equity index out-of-the money (OTM) put options and at-the-money (ATM) straddles are systematically overpriced? In their October 2018 paper entitled "Index Option…
- Average Call-Put Implied Volatility Spread and Future Stock Market Return Aggregate implied volatility spread (average call-put IV difference across stocks) explains 12.4% of quarterly stock return variation out-of-sample, achieving 0.65 Sharpe ratio vs 0.43 for market (Jan 1996–Dec 2015).
- Aggregate Stock Option Put-Call Ratio as Market Return Predictor PC-OI (put-call open interest ratio) for high-volatility stocks predicted 3-month market returns with R-squared 0.12 but underperformed post-2008 (Jan 1996–Aug 2014; gross returns, long/short market timing).
- Trend Following and Covered Calls in Combination Combining trend following and covered call strategies improved multi-class portfolio Sharpe ratios (0.86 vs 0.66 for ERC allocation; 2007-2016; quarterly rebalancing across 10 asset classes).
- Simple Test of ‘When to Sell Equity Index Put Options’ PUT index gains do not concentrate before option expiration as theory suggests; days OE-2 and OE-1 show extreme drawdowns during crashes despite high win rates (1986–2017; daily analysis 2007–2017).
- When to Sell Equity Index Put Options Shorting S&P 500 OTM puts one week before expiration outperformed longer holding periods (8.7% vs 5.5% annual return, Sharpe 2.8 vs 0.66; Jan 1996–Aug 2015; equal-weighted positions held to expiration).
- Performance of CBOE PutWrite Indexes PUT and WPUT underperformed S&P 500 Total Return Index (6.6% and 5.6% vs 7.1% annual compound returns; Feb 2006–Dec 2015; cash-secured put selling monthly/weekly; gross returns before trading costs).
- Profitability of Systematically Selling Equity Index Put and Call Options Selling equity index puts outperformed calls (6.5% vs 0.4% for 60-day; 13.9% vs -0.13% for 180-day; 14.2% vs -0.44% for 365-day average returns; Jan 1996–Jul 2013; unhedged systematic selling with…
- Enhancement of Index Covered Calls via Hedging Delta-hedged covered calls outperformed basic covered calls (0.52 vs 0.37 Sharpe ratio for BXM; Mar 1996–Dec 2014; daily hedge adjustments via S&P 500 futures; gross returns before trading frictions).
- Predictive Power of Put-Call Ratios Put-call ratios show weak, inconsistent correlations with SPY future returns (R-squared 0.006 for best performer; 1995-2013; CBOE/ISE total/index/equity ratios over 5-63 day horizons; 68-trade strategy underperformed buy-and-hold).
- Russell 2000 Index Buy-Write Strategy Performance Russell 2000 buy-write outperformed the index (8.9% vs 8.1% annualized return; Jan 1996–Mar 2011; 2% OTM calls, 1-month expiration, hold to expiration; lower volatility 16.6% vs 21.1%).
- Cross Sections of Covered Call Returns Covered calls on high-volatility stocks outperformed low-volatility equivalents (2.33% monthly hedge return; 1996-2006; at-the-money, monthly rebalance), but 100% bid-ask spread friction eliminates statistical significance.
- A Few Notes on Put Option Strategies for Smarter Trading Thomsett's Put Option Strategies for Smarter Trading explains put-based mechanics for individual stocks but provides no evidence of strategy performance or acknowledgment of trading frictions like bid-ask spreads.
- Performance of Buy-Write Strategies for Australian Stocks Buy-write strategies underperformed underlying Australian stocks (7.6% vs 13.7% annual returns for monthly 0-2% out-of-the-money; Jan 1995–Oct 2006; quarterly rebalancing optimal; 179 stocks).
- Sell Index Put Options Only When Above Long-term SMA? Russell 2000 put selling shows favorable but not decisive risk reduction when above short-term SMAs; TOTM effect near zero in falling markets limits safety margin for at-the-money options (22-year Russell…
- Are Some Covered Calls More Profitable Than Others? Covered calls on high-volatility stocks outperformed low-volatility stocks by 2.33% monthly (1996-2006; delta-hedged positions held to maturity; ~160,000 at-the-money options), but this premium disappears under realistic trading costs.
- Do Stock Index Put-Call Ratio Trend Reversals Anticipate Trend Reversals of the Index Itself? S&P 500 put-call ratio trend reversals show no predictive power for index reversals (R-squared 0.02, correlation -0.13; Oct 2003–Jan 2008; 10-day normalized slopes, tested with various lags).
- Abnormal Returns from Selling Index Put Options? Selling S&P 500 put options generated abnormal returns but with occasional large losses (-41% mean monthly return for OTM puts, -13% for ATM straddles; Jan 1987–Jun 2005; held-to-expiration strategy).
- The Predictive Power of the Put-Call Ratio for Individual Stocks Low put-call ratio stocks outperformed high put-call ratio stocks by 0.4% next day and 1% next week (1990-2001; CBOE options; buy-to-open volumes only; effect concentrated in non-public detailed trading data).
Hedging with options
32 articlesProtective puts, collars and tail-risk hedges.
- Do Tail Risk ETFs Work? Composite tail risk ETFs (TRSK, QTR, XTR, CYA) showed large return penalties relative to matched SPY, EFA and QQQ, and pure hedges (FAIL, TAIL, CAOS) added drag (monthly returns through…
- Dynamic Exchange Rate Hedging for Cross-currency Equity Holdings Carry-based dynamic FX hedging (hedge only when the equity-market currency's interest rate exceeds the home rate) improved on both no hedging and full hedging in all 14 developed markets, by…
- Performance of ETFs Employing Rule-based Hedging HETFs underperformed S&P 500 with equal-weighted portfolio generating statistically significant negative alpha (-0.29% monthly gross 7-factor; Jan 2008–Dec 2017; 23 funds available end-2017).
- Improved Use of VIX Futures for Hedging the Stock Market The Enhanced Portfolio (dynamically long/short VIX30 based on volatility risk premium) outperformed S&P 500 (1.19 vs 0.58 Sharpe ratio; Jan 2007-Dec 2017; daily rebalancing with risk parity weighting).
- Best U.S. Equity Market Hedge Strategy? Time series momentum (3-month lookback, no long equity) plus quality factor hedge outperformed pure SPY during eight worst drawdowns since 1985 (50% hedge allocation optimal; 1985–2018; daily rebalancing, 15% target…
- Managing Volatility to Suppress U.S. Stock Market Tail Risk S&P 500 managed volatility strategy (daily rebalancing to target volatility) did not materially improve gross Sharpe ratio since 1960 but suppressed kurtosis and increased skewness (July 1926–Nov 2016; daily rebalancing).
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- U.S. Stock Market Crisis Hedge Strategies Time-series momentum (3-month, no long equity) and composite quality factor portfolios together showed 89% annualized returns during S&P 500 drawdowns >15% (1985-2016; seven crisis episodes; 10% volatility target).
- Tail Risk as Stock Return Anomaly Driver Small, value and high-volatility stocks exhibit statistically significant positive tail risk dependence during market crashes, measured via VIX Tail Hedge Index sensitivity (Jan 2007–Feb 2016; Fama-French augmented model).
- Buying and Selling Crash Insurance (Tail Risk Protection) Dynamic put buying for crash protection outperforms static put buying, while static put selling for premium harvesting outperforms dynamic put selling (2003-2012 S&P 500 data; filtered bootstrap simulations; gross of…
- Equity Index Collar Performance CLL underperformed S&P 500 (3.2% vs 7.3% annualized excess return; July 1986–December 2014; collar strategy buying 3-month puts 5% OTM, selling 1-month calls 10% OTM; monthly returns analysis).
- Gold a Consistent Dynamic Inflation Hedge? Gold acts as an inflation hedge at short-term and long-run horizons across developed markets, with dynamic correlations below 0.19 but strengthening during high-inflation periods (1968-2014; wavelet analysis).
- Valuation/Trend Hedging of a Value and Momentum Stock Portfolio Value-momentum stock strategy with valuation/trend hedging outperformed S&P 500 (15.6% vs 10.0% annualized; 1964-2014; hedged portfolio suppressed drawdown to -27% vs -51%; monthly rebalancing of top 200 stocks).
- Gold as Hedge, Safe Haven and Downside Risk Protection Gold acts as a short-run hedge but increases downside risk over longer horizons, especially during economic recessions (January 1980–December 2013; U.S., UK, German, Japanese markets; wavelet analysis).
- Hedges/Shorting to Exploit Sector ETF Momentum? Hedging sector ETF momentum (long top, short bottom based on 6-month returns) underperformed basic momentum across three strategies (Dec 1998-Dec 2013; 9 SPDR sector ETFs; monthly rebalancing with 0.25% friction).
- Hedging Inflation with Commodities Commodities generally failed as inflation hedges, with only 15 of 45 individual commodities beating inflation (1960-2012; spot prices vs CPI; energy index most consistent).
- Hedging Stock Portfolios with VIX Futures Index Products Medium-term VIX futures (VXZ proxy) boosted stock portfolio Sharpe ratios while short-term futures (VXX proxy) reduced them due to negative roll yield (Dec 2005–Apr 2012; 26-week lagged regressions).
- Timing and Hedging the Roll Return for VIX Futures VIX futures contango/backwardation predicts exploitable returns; hedged strategy generated 53% annual compound return (2006-2011; short VIX futures in contango, long in backwardation, hedged with E-mini S&P 500 futures).
- Real Estate as Inflation Hedge Equity REITs matched inflation 65.8% of the time during high-inflation periods vs commodities at 70.4% (Jan 1978–Aug 2011; six-month intervals; frequency analysis of nominal returns vs CPI).
- Combining Tail Risk Management and Modern Portfolio Theory Tail-risk-adjusted minimum variance portfolios outperformed traditional minimum variance by 0.24-0.49% annually after 0.2% trading costs (Feb 1973-Jun 2010; 3-stock DJIA combinations; monthly rebalancing).
- Commodities as an Inflation Hedge S&P GSCI provided economically significant inflation hedging across four of five measures over various horizons, with Non-Precious Metals performing best (Jan 1982–Aug 2010; five hedging capacity measures).
- Diversifying within Versus across Hedge Strategies Funds of hedge funds (FoF) diversify investments across hedge funds to achieve steady return streams. Some FoFs diversify within a single hedge fund strategy (category), while others diversify both within…
- Hedges and Safe Havens Across Asset Classes Gold serves as a hedge for all assets except oil and acts as a safe haven for equities and dollar, while bonds provide safe haven benefits for equities (Jan 1985–Oct…
- Hedging Crashes: Volatility Futures vs. Index Puts 3-month rolling VIX futures outperformed 1-month puts and VT futures as crash hedges for SPY positions (2004-2009; marked-to-market comparison with 10% OTM puts and variance futures).
- Ideal Hedge for High-yield Corporate Bonds? There is probably no instrument that is an "ideal" hedge based on the definition of very low return correlations with high-yield bonds under all economic conditions.
- Gold as Hedge and Safe Haven Gold acts as both hedge and safe haven for US/European stocks but not bonds or emerging markets, with safe haven effects lasting ~15 days post-crash (1995-2009; daily return correlations; descriptive…
- ATM or OTM Index Puts for Portfolio Hedging? The post's review of prior CXO research suggests OTM index puts are likely less efficient than ATM puts, and ATM less than in-the-money puts, on return on investment (literature summary;…
- Hedging Against Inflation Commodities best hedge short-term inflation shocks (4-10% return increase per 1% inflation rise; 1927-2008), but equities prove worst long-term hedge with no meaningful recovery post-shock.
- Passive and Active Collar Strategies for ETFs and Mutual Funds Passive collar strategies outperformed QQQ during bear markets but underperformed in bull periods, with active collars generally beating passive variants (Mar 1999–May 2009; monthly rebalancing; gross returns).
- Collaring a Broad Equity ETF for Stable Returns? QQQQ collar strategies outperformed underlying ETF (-1.8% to +12.9% vs -1.7% annualized returns) while drastically reducing volatility (4.0%-12.8% vs 29.9% standard deviation; Mar 1999-Mar 2008; 27 collar combinations varying moneyness/maturity).
- Hedging/Speculative Pressure and Commodity Futures Returns Speculator-based active commodity strategies outperformed hedger-based strategies (11.1% vs 9.6% mean annual return; 1994–2006; buying when speculators net long in backwardated markets, selling when net short in contangoed markets; 13…
- Between the Hedges Net Portfolio Position Between the Hedges net portfolio positions show no predictive value for S&P 500 returns (correlation -0.05, R² 0.003; Feb 2004–Feb 2008; 1,015 trading days), but are reactive same-day (correlation 0.39).
- Automating the “Hedge” in Hedge Funds Kat and Palaro find only 17.7% of hedge funds beat mechanical replicants trading S&P 500, T-bond and Eurodollar futures (1917 funds; through Nov 2004; statistical replication methodology).
Leveraged and inverse ETFs
34 articlesDecay, compounding and strategies using 2x and 3x funds.
- Classic Stocks-Bonds Portfolios with Leveraged ETFs Leverage may boost average returns of stocks-bonds portfolios at the cost of much deeper drawdowns: a monthly rebalanced 40/20/40 TQQQ/TMF/TLT portfolio hit a -77% MaxDD in Dec 2022 (Feb 2010–Aug…
- Ups and Downs of Leveraged ETFs Long LETFs earned $115B aggregate profit versus $80B losses for short LETFs (Jan 2006–Sep 2025); broad equity LETFs earned $100B, a $40B edge over unlevered tracked assets, but LETFs lagged…
- Leveraged ETF Share Creation/Redemption Signals DLDR (trades opposite LETF issuers at the next close: sell/short after share count rises, buy after it falls) generated over $10 billion in aggregate gains, roughly 30% CAGR, profitable in…
- Capturing the Leveraged/Inverse ETF Deception Premium? Handsome Rob (shorts six leveraged/inverse ETF pairs, rebalanced quarterly, with a top-up rule after price declines) beat the S&P 500 by an average 8% gross CAGR (Q1 2016–Q2 2025; before…
- Multi-day Leveraged ETF Performance Daily reset leveraged ETFs did not underperform matched-leverage no-reset positions on average net of estimated reset and margin financing costs (1,000 simulated paths per combination; index inception–June 2023; 5–252-day holdings;…
- Best Approach for Shorting Leveraged ETFs? Shorting 100% bear LETFs beat the underlying benchmark by a gross 4.65% per quarter (0.71 higher gross Sharpe; 44 bull/bear U.S. LETF pairs, 2012–2020; quarterly and annual rebalancing), while mixed…
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- Turn-of-the-Month Effect Applied to SSO Holding SSO only during the eight-day turn-of-the-month window (TOTM) had lower net CAGR than buy-and-hold SSO (11.0% vs 13.8%; Jun 2006–Apr 2024; 0.1% one-way switching frictions) but a shallower monthly…
- Concentration of Sophistication in Options on Leveraged ETFs? SPXL option-signal timing (monthly; hold SPXL if ATM call-minus-put implied volatility change exceeds its 12-month median, else risk-free asset) outperformed buy-and-hold SPY ($27.59 vs $5.23 terminal value of $1.00; Jan…
- Horse Race: SSO or QQQ vice SPY in SACEVS and SACEMS? Substituting QQQ for SPY, or SSO for SPY in holdings only, in SACEVS, SACEMS and their 50-50 mix is associated with gross CAGR, MaxDD and Sharpe profiles a moderately risk-tolerant…
- Conditionally Substitute SSO for SPY in SACEVS and SACEMS? Substituting SSO for SPY in SACEVS and SACEMS (when SPY is above its SMA200 and VIX SMA200 is below 18) raised returns but with higher volatility, lower gross Sharpe ratios…
- Using One Third 3X Funds for Some SACEMS Assets Replacing SPY, IWM and TLT with one-third 3X funds (SPXL, TNA, TMF) plus two-thirds cash in SACEMS (monthly asset class momentum) offers little evidence of improved performance in Top 1,…
- Update on Classic Portfolio Allocations with Leveraged ETFs A 40% TQQQ/20% TMF/40% TLT leveraged portfolio generated 24.5% average annual return with 22.8% volatility (Aug 2005–Jan 2021; monthly rebalancing; last 3 years out-of-sample).
- Returns for Leveraged Securities High-leverage securities (short-maturity, out-of-money options; 2X ETFs) generate lower returns than low-leverage equivalents, with long-short portfolios achieving Sharpe ratios exceeding 1.0 (1996-2018; gross returns).
- Rational Uses of Leveraged and Inverse ETPs Leveraged/inverse ETPs exhibit high daily turnover (16.9% equity, 51% commodity, 114% volatility) indicating short-term use, with compound leveraged returns deviating unpredictably from targets due to volatility decay (Dec 2005–Mar 2020;…
- Update on Shorting Leveraged ETF Pairs Shorting leveraged ETF pairs generated average monthly gains of $514-$600 across SSO/SDS, UPRO/SPXU, and TQQQ/SQQQ pairs, but strategies turn unprofitable when monthly carrying costs exceed 0.25-0.30% (respective ETF inceptions through…
- Using RSI(2) to Trade Leveraged ETFs RSI(2) strategies on SSO underperformed buy-and-hold (7.7% vs 11.6% CAGR for 5-70 variant; 4.9% vs 11.6% for 10-90; Jul 2006–Oct 2019; oversold entry/overbought exit with SSO).
- Simple Asset Class Leveraged ETF Momentum Strategy SACEMS leveraged ETF Top 3 outperformed unleveraged version (8.4% vs 7.6% CAGR; Jan 2010–Jan 2019; 4-month momentum, monthly rebal; 2X vs 1X ETFs) but with worse risk-adjusted returns (0.42 vs…
- Managing Asset Class Exposures with Leveraged ETFs Leveraged ETF portfolios (2X/3X with proportionally reduced allocations) outperformed 1X baseline (12.5% vs 11.1% annual return; 1946-2017 simulation; rebalanced when equity drift >10%; substantial outperformance from bond allocation).
- Leveraged ETF Pairs Performance Certain short-long leveraged ETF combinations outperformed underlying indexes (1.51 vs 1.04 Sharpe ratio for UPRO/SPXU/T-bills vs S&P 500; 2010-2016; with rebalancing thresholds; gross returns excluding borrowing costs).
- Monthly Rebalanced Shorting of Leveraged ETF Pairs Shorting pairs of 3X/-3X leveraged ETFs generated positive monthly returns for four of six pairs studied (FAS/FAZ, TNA/TZA, JNUG/JDST, ERX/ERY averaging >1% monthly; 2007-2016; monthly rebalancing to equal short positions).
- Small Leveraged Value Stock Ranking System Small leveraged value stocks outperformed the broad U.S. market (25.1% vs unstated benchmark; 1963–2014; top 25 stocks from leveraged small-cap value universe, annual rebalancing; quality/technical ranking system).
- Multi-year Performance of Leveraged ETFs Leveraged ETFs (+2X/-2X, +3X/-3X) consistently underperformed unleveraged counterparts on risk-adjusted basis, with Sharpe ratios 9-91% lower than targets (2007-2015; monthly tracking vs daily leverage targets).
- Testing the Rydex 2X/-2X Mutual Fund Asset Ratio The Rydex 2X/-2X asset ratio shows no predictive power for S&P 500 returns (R-squared 0.001; May 2000–Jan 2015; correlation analysis and quintile rankings; out-of-sample signals averaged -0.29% and -0.06%).
- Gold Futures or Leveraged ETFs? Gold futures outperform leveraged ETFs for leveraged gold exposure; leveraged ETFs increasingly underperform benchmarks over longer holding periods due to volatility drag (2012-2014; daily rebalanced futures vs ETFs).
- Front-running Leveraged ETFs at the End of the Day? Front-running leveraged ETF rebalancing generated 104% cumulative gross return (0.60% per trade; Jun 2006–Jul 2011; buy SSO/SDS at 2:45pm on 2%+ market moves, sell at close; profits concentrated in late…
- Returns of Matched Long and Short Leveraged ETFs Shorting matched leveraged ETF pairs generated 4-7% annual gross returns (2007-2011; 2X/-2X and 3X/-3X pairs), but daily rebalancing costs could reduce returns by ~22% annually.
- Leveraged Style ETF (2X and -2X) Momentum Strategy Leveraged style ETF 6-1 momentum strategy underperformed SPY buy-and-hold with much higher volatility (Apr 2007–Nov 2011; monthly rebalancing across 12 ProShares 2X/-2X Russell style ETFs; 56-month sample).
- Leveraged Sector Fund Momentum Strategy 6-1 leveraged sector momentum underperformed SPY; 6-1 with SMA10 cash filter achieved highest average monthly return with lower volatility (Dec 2000–Nov 2011; 7 ProFunds 1.5X sector funds).
- Multi-year Performance of Non-equity Leveraged ETFs 2X leveraged commodity/currency ETFs deviated from daily targets over multi-year periods, with 2X long realizing +1.98 leverage (7% penalty) and 2X short realizing -0.22 leverage (50% penalty) (Dec 2008–Nov 2011;…
- Shorting Leveraged ETF Pairs Shorting paired leveraged ETF positions (2X/-2X) generated positive returns (46% for SSO-SDS, 16% for QLD-QID; Jul 2006–Oct 2011; equal initial shorts held without rebalancing; assumed zero net shorting costs).
- Why Might the Leveraged ETF Grind Not Work? Since June 2009, the VIX declined ~20% while markets trended up with lower volatility, causing leveraged ETF tracking errors to favor long positions over the typical rebalancing decay (2009–date; options-based…
- Bear Spreads on Leveraged ETF Pairs? ...this logic assumes that the options market maker (or other options trade counterparty) is ignoring or underestimating the impact of the grind when pricing the options.
- Unintended Characteristics of Leveraged and Inverse ETFs Leveraged and inverse ETFs show path-dependent returns and short holding periods (1–2 days for 3x/-3x funds; 15 days for 2x), which the paper associates with buy-and-hold drag (84 U.S. equity…
- Performance of Leveraged ETFs over Extended Holding Periods Leveraged ETFs deviate considerably from 2x/-2x targets over extended periods, with UltraShort funds showing larger deviations (inception through Dec 2008; DDM/DXD, SSO/SDS, QLD/QID vs DIA/SPY/QQQQ; 2-252 day holding periods).
Other option research
104 articlesOption pricing, expirations and other option tests.
- Historical U.S. Equity Returns for a 5-Year Horizon Rolling 5-year nominal returns were negative about 22% of the time for both Shiller's S&P Composite Index (total return, 1871–2025; 149 overlapping intervals) and the S&P 500 (price only, 1927–2025;…
- How Are Laddered Buffer ETFs Doing? Five laddered buffer ETFs had lower CAGRs than SPY or QQQ (equal-weighted average 9.9% vs 14.4%) but shallower monthly MaxDDs (-12% vs -24%) (sample periods differ by fund; monthly total…
- Half-day Momentum and Reversal in Stock Options U.S. stock option returns show half-day momentum at even lags and reversal at odd lags, with daily long-short deciles earning 0.22% (intraday) and 0.45% (overnight) gross momentum returns per half-day…
- Signals from Trading Volumes of Informed Traders The INFO factor (long top/short bottom decile of equal-weighted stocks ranked monthly on insider net purchases, short interest, and option/stock volume) returned 1.12% gross vs 0.37% monthly for momentum; 0.84%…
- Equity Options Trading Frictions Identical market orders placed across six brokers averaged 3.9% round-trip frictions relative to position size, ranging from about 0% (Vanguard) to 7% (Robinhood) and rising with payment for order flow…
- Returns and Volatilities of ETF Option Strategies Covered calls on equity and bond ETFs tended to lower volatility and return versus buy-and-hold, while protective puts consistently raised volatility, usually with lower return (IWF/VTV/IVV/BND/JNK/AGG options held to expiration;…
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- Informativeness of Seeking Alpha Articles for Stock Returns A long-short portfolio of Seeking Alpha stocks (highest vs. lowest monthly standardized net article sentiment) earned 0.70% average gross monthly return, 0.62% abnormal after size, book-to-market and momentum (2004–Oct 2018;…
- Options Strategies with Long Stock Positions Covered combinations and covered calls generally rank above buy-and-hold on risk-adjusted metrics, ahead of collars and protective puts (10 widely held stocks; monthly rolls, ~5% out-of-the-money options; Jan 2004–Nov 2019;…
- Economic Data Risk Premium In Short-term Options S&P 500 1DTE at-the-money call returns averaged 22.1% on economic data release days vs 2.6% on other days; at-the-money puts averaged -28.2% vs -1.6% (Jan 2012–early Dec 2023; midpoint quotes,…
- Actual Retail Option Trading/Returns Retail option trades averaged a -0.8% return, small relative to typical 5%–20% bid-ask spreads, while uncovered option sales averaged 21% (5,182 journal-verified retail traders; 2.1 million trades; Jan 2020–Dec 2022;…
- 0DTE Strategy Outcomes Simple unhedged 0DTE S&P 500 Index option strategies seldom paid off gross of costs; the variance risk premium was positive but tiny, and most put, call, strangle and spread medians…
- Look-ahead Bias in Option Trading Backtests Correcting look-ahead bias cut average gross monthly returns in two option strategies (stock-characteristic strategy, profitability example: 2.27% to 0.10%, Jan 2012–Jun 2020; liquidity strategy, calls: 1.52% to 0.19%, Jan 1996–Apr…
- Retail 0DTE Option Trader Performance Retail traders lost about $70 million in aggregate on 0DTE S&P 500 Index options, with average daily net loss rising from $184,000 to $358,000 after daily expirations began in May…
- Cheap Options for Stock Market Crash Protection Cheap put portfolio hedged S&P 500 better than index puts (7.6% vs 5.1% gross annualized return; Sharpe 0.60 vs 0.42; Jan 1996–Dec 2020; monthly rebalanced; cheapest 20% of ~10-delta single-stock…
- Performance of Defined Outcome ETFs Innovator Defined Outcome Buffer ETFs had shallower average drawdown than SPY (-8.3% vs -11.9%; actual funds 2019–2021; simulated strategy Jan 2013–Aug 2022), with average gain cap of 15.7%; VIX-quintile results…
- Avoiding Options Expiration Week Avoiding options expiration week underperformed buy-and-hold SPY (net CAGR 5.4% vs 9.5%; MaxDD -58% vs -55%; Jan 1993–Dec 2022; Strategy holds SPY except second-to-third Friday each month; 0.1% round-trip cost;…
- Option Gamma and Associated Future Stock Returns Low-net-gamma stocks outperformed high-net-gamma stocks (1.45% vs 0.58% gross average next-month return; 0.87% monthly spread, value-weighted extreme deciles; U.S. stocks over $5, Jan 1996–Dec 2021; monthly sorts, before costs and…
- Simple Stock Index Option Strategies BuyWrite (BXM), PutWrite (PUT) and 95-110 Collar (CLL) indexes underperformed the S&P 500 Total Return Index (CAGR 8.6%, 9.7%, 7.5% vs 10.9%; June 1986–Mar 2022; monthly end-of-month levels, gross of…
- Trading Around Option Expiration Days S&P 500 average daily returns show a modest positive bias before option expiration and a negative bias during and just after it, but variability swamps the averages (Jan 1990–Feb 2022;…
- Performance of Derivatives Traders Chinese futures traders lost money on average (gross/net daily return -0.48%/-0.70% for individuals; -0.16%/-0.23% for institutions); higher implied leverage correlates with lower gross return (10,822 traders; Jan 2014–Dec 2016; descriptive).
- What Kind of Index Option Traders and Trades Are Profitable? Domestic retail accounts had a median annualized Sharpe ratio of -1.11 versus +1.11 for domestic institutional accounts (KOSPI 200 options/futures; Jan 2010–Jun 2014; 153,835 retail, 5,904 institutional accounts; before broker…
- Stock Option Momentum and Seasonality Stock option straddles exhibit momentum and seasonality patterns, with 12-month momentum generating 6.6% gross monthly return and Sharpe ratios 3x higher than stocks (Jan 1996–Jun 2019; zero-delta straddles, monthly rebalancing;…
- Options on Low-priced Stocks Overpriced? Options on low-priced stocks underperformed those on high-priced stocks (0.44% vs 0% weekly 8-factor alpha for calls; 1996-2017; delta-hedged portfolios, monthly rebalancing; 257K options).
- Option Valuation How do market makers and sophisticated investors/traders determine option value? In his July 2019 essay entitled "Trading Volatility", Emanuel Derman outlines the history and shortcomings of option valuation as described…
- Stock Return Autocorrelations and Option Returns Options on stocks with higher return autocorrelations outperformed those with lower autocorrelations (4.7% vs 5.9% monthly return spreads across quintiles; Jan 1996–Dec 2017; 36-month rolling autocorrelation ranking; 676 stocks with…
- Equity Index Options to Exploit Stock Market Volatility Spikes? Delta-hedged equity index options are profitable only during the largest volatility spikes (top decile, 6.6% annualized return vs -2.7% other deciles; Jan 1996–Dec 2016; monthly portfolio of puts/calls).
- Shorting Equity Options to Automate Portfolio Rebalancing Option overlay rebalancing matched 60-40 SPY/bond daily rebalancing (5.23% excess return, 0.53 Sharpe vs monthly rebalancing 5.12%, 0.52 Sharpe; 1996-2015; short OTM calls/puts, ~15-day maturity).
- Covered Equity Index Calls Worldwide Covered call strategies on 11 global equity indexes delivered higher risk-adjusted returns than underlying indexes (0.45 vs 0.33 Sharpe ratio; through Sep 2015; monthly option selling).
- Best Index Options to Sell? Short delta-hedged S&P 500 puts outperformed calls, with short-maturity moderately out-of-the-money options delivering highest returns but higher volatility (Mar 1996–Dec 2015; daily delta-hedge rebalancing).
- Do Protective Equity Index Puts Work Well? CBOE S&P 500 5% Put Protection Index underperformed equivalent-return stock-cash allocation (2.5% vs 2.5% CAGR but deeper drawdowns -32.1% vs -20.9%; Jul 1986–May 2016; monthly 5% OTM puts vs optimized…
- Simple Test of ‘Option-implied Correlation as Stock Market Return Predictor’ S&P 500 implied correlation indexes show weak predictive power for equity returns, with correlations near zero for next-day to next-month horizons (Jan 2007–Feb 2017; CBOE two-year series).
- Option-implied Correlation as Stock Market Return Predictor Option-implied correlation predicts S&P 500 returns with stronger power than variance risk premium, especially beyond one quarter (Jan 1996–Aug 2015; statistical regressions, not trading tests).
- Equity Option Returns by Monthly Expiration Interval Options underperform during 4-week vs 5-week monthly expiration intervals (2.6% weekly return spread for straddles; 1996–2014; delta-hedged portfolios; liquid equity options).
- Intraday Versus Overnight Option Returns S&P 500 delta-hedged options show negative overnight returns (-1.0%) and positive intraday returns (+0.3%), driving the overall -0.7% risk premium (Jan 2004–Apr 2013; bid-ask midpoints; gross returns).
- Understanding Volatility Trading Strategies Short volatility strategies outperformed SPY (straddles: 7.43% vs 6.58% annual return, 8.0% vs 18.0% volatility; strangles: 8.55% return, 7.0% volatility; Jan 2005–Jan 2016; monthly SPY options with daily delta hedging).
- Using OTM Equity Options Volume to Predict Stock Returns OTM option volumes predict stock returns, with normalized call volume correlating positively and put volume negatively; long-short strategy based on OTM put-call ratio generates 0.19% gross weekly return (1996-2015; hedge…
- Net Equity Index Option Buying Pressure and Future Returns Index put option net buying pressure correlates with higher next-week S&P 500 returns (one std dev increase predicts 0.3% gain; 2006-2013; strongest during major economic announcements with high VIX; descriptive;…
- Picking Stocks Based on Option Volume Spikes Stocks with option volume spikes outperformed the market by 9.1% annualized (top tercile call-to-put ratios; Jan 1996–Dec 2013; 30-day holds after 10+ contract spikes following week-long dormancy; gross returns).
- Option Strategies Based on Factor Sorts Option strategies based on 8 stock pricing factors generated 1.28% to 3.92% gross monthly returns via delta-neutral call writing (1996-2012; monthly rebalancing; 5,179 stocks with options).
- Stress Test for Equity Index Option Strategies Schulte finds most long equity index option strategies underperformed their underlying indexes on a net basis during 2006-2010, while short option strategies generally outperformed (Jan 2006-Sep 2010; 3.1% avg bid-ask…
- When Do Holders of Equity Options Exercise Early? Market participants exercise early 1.8 billion non-dividend equity option contracts, with 8.4% of deep in-the-money options on high-shorting-cost stocks exercised early (2003-2010; U.S. equity options data).
- Exploiting VIX Futures Predictability with VIX Options VIX option strategies exploiting futures roll patterns generated gross returns of 29-42% (backwardation calls), 6.8-11% (contango puts), and 10-21% (high volatility premium puts) versus -5.6% to 2% for random entry…
- Betting Against High Downside Risk? Betting against volatility outperformed among stocks with low implied skewness (1.18%-1.53% four-factor alpha; Jan 1996–Aug 2014; monthly rebalanced quintile sorts; 5,509 optionable stocks).
- Timing Option Trades to Suppress Trading Frictions Sophisticated option traders reduced effective bid-ask spreads from 5.5 to 3.5 cents by timing trades around predictable quote changes, with timed trades achieving 1.3-cent spreads versus 8.1-cent quoted spreads (37…
- Options for Retirement? Foltice argues option-based retirement strategies (TIPS core + long-term at-the-money index calls) never fail at 75% income replacement vs conventional allocations failing ~25% of time (age 60-65; simulations based on…
- Expected Volatility of Stock Market Volatility as a Predictor Higher VVIX predicts more negative returns for hedged S&P 500 Index and VIX futures options, with VIX futures options averaging -0.57% to -1.41% monthly (Feb 2006–Jun 2013; daily-hedged portfolios).
- Best Option-based Stock Return Predictors? CPIV (call-put implied volatility spread) outperformed as strongest stock return predictor with high-minus-low hedge portfolios generating 1.27% gross monthly returns (Feb 1996–Dec 2011; quintile sorts; 191 months).
- Index Option Strike Price Volume Dispersion as a Return Predictor S&P 500 option strike price volume dispersion ("ambiguity") negatively correlates with future stock market returns and outperforms most predictors except variance risk premium (1996–2012; monthly regressions).
- Stock Return-Implied Volatility Two-way Feedback Stocks with highest prior-month call volatility increases outperformed lowest by ~1% monthly (risk-adjusted; 1996-2011; decile long-short of near-term 0.5 delta options; 0.90 Sharpe ratio gross).
- Option Straddles Around Earnings Announcements Delta-neutral straddles around earnings generate 1.64% average daily net returns (4-10 days to expiration, trading friction half bid-ask spread; 1996-2010; holding 3 days before through announcement day).
- Currency Exchange Rate Options Cheap? Hedged currency carry trades outperformed unhedged versions (0.79 vs 0.47 gross Sharpe ratio; Mar 2004–Aug 2012; at-the-money options matching short/long FX positions; 22 currencies with modeled option prices).
- How to Beat Equal Weight Asset Allocation? Are there strategic asset allocation methodologies that reliably beat equal weight? In the February 2012 version of their paper entitled "Portfolio Optimization Using Forward-Looking Information", Alexander Kempf, Olaf Korn and Sven…
- Stock Returns and Changes in Implied Volatility Stocks with large increases in call-implied volatility outperform those with decreases by 0.97% next-month gross return (Jan 1996–Sep 2008; monthly quintile portfolios; broad U.S. stock sample).
- Follow the Option Trading Leaders? Long-short strategy using four option metrics outperformed risk-free rate (7.6% net annual return; 1996-2009; turnover-suppressed rebalancing; 100 largest US stocks with options data).
- Predicting Stock Market Returns with Implied Index Volatilities The S&P 500 implied volatility spread (OTM puts minus ATM calls) correlates negatively with next-day index returns, with 1% spread increase indicating 0.02%-0.10% return decrease (1996-2008; descriptive; not a trading…
- Trading Options on Volatility of Fundamentals Options straddles based on fundamental volatility (accounting data variability) generated 8.0% monthly gross returns but -9.3% net after bid-ask spreads (Jan 1996–Sep 2010; 52,251 firm-quarters).
- Exploiting the Implied Volatility Term Structure Implied volatility term structure slope predicts option returns, with straddle hedge strategies generating 27.1% average monthly gross returns (12.3% net; Jan 1996-Jun 2007; long high-slope/short low-slope stocks; 260 stocks monthly).
- A Few Notes on The Market Taker’s Edge The Market Taker's Edge offers trading floor insights but lacks statistical analysis of strategy profitability, focusing on market maker operations rather than quantifiable edges for individual traders (2011 book review).
- Index Versus ETF Option Pricing ETF options exhibit more pronounced volatility smiles than index options, with deep-in-the-money ETF implied volatilities considerably higher than index equivalents (2003-2006; DIA, SPY, QQQ vs underlying indexes).
- Condor Options Newsletter Performance Review Condor Options Newsletter generated 17.7% CAGR versus 3.5% breakeven commission rate (May 2007–June 2011; 162 iron condor trades; one-eighth capital allocation); trade-by-trade returns declined over sample period.
- Return Versus Liquidity for Equity Options Option illiquidity correlates positively with future option returns, with a 2-standard-deviation increase in illiquidity associated with 2.4% higher next-day returns for short-term OTM calls (S&P 500 components; 1996–2007; regression analysis).
- Sell Lottery Tickets for (Their) Fun and (Your) Profit? High-skewness options underperformed low-skewness options (spreads up to 60% per week; 1996-2009; puts outperformed calls, effects strongest near expiration; equally-weighted portfolios by skewness quintiles).
- Extracting a Volatility Premium with Equity Options? Delta-hedged options on high-volatility stocks generate extremely negative returns, enabling a strategy buying low-volatility/selling high-volatility options to earn ~2% monthly (Jan 1996–Oct 2009; ~200K observations; profits disappear with realistic trading…
- Lead-lag Relationship for Options and Stocks Stock price movements lead options quote adjustments in disagreement instances, not vice versa (36 stocks/ETFs; Apr 2003–Oct 2006; put-call parity bid-ask range analysis across 107K disagreements).
- Stock Price Pinning at Options Expiration? Stock prices cluster at option strike prices on expiration dates, with optionable stocks altered by average 16.5 basis points via hedge rebalancing and manipulation (2004 study; aggregate $9B market cap…
- A Few Notes on Trading Realities Augen argues algorithmic trading has eliminated technical analysis advantages for private investors, recommending options strategies over stock ownership; however, assertions lack rigorous empirical testing (2010 book).
- Selling Calls or Puts According to Trend Switching between selling covered calls (after bearish signals) and puts (after bullish signals) using golden/death cross outperformed buy-and-hold SPTR (16.3% vs ~10% annualized; Jun 1988–Dec 2009; 50-50 SPTR-cash allocation).
- Are ETF Options Section 1256 Contracts? The post discusses ETF options tax treatment under Section 1256, concluding that claiming Section 1256 status appears risky without specific IRS ruling (descriptive; not a trading test; tax analysis).
- Weekend Effect for Individual Stock Options? Individual stock options show a weekend effect with Friday-Monday returns averaging -0.62% versus positive returns on other days (Jan 1996–Jun 2007; equally weighted portfolios; statistically significant for puts and calls).
- Effects of Earnings Releases on Option Prices? Option trading volume increases over 10% in the four days before earnings announcements, with higher options/stock volume ratios predicting lower post-earnings drift (1996-2007; multiple studies).
- Option Expiration Week Stock Return Drill-down Large-cap stocks with actively traded options outperformed during expiration weeks (0.45% vs 0.12% average weekly return; 1996-2008; 28 stocks), with effect strongest for high option/stock volume ratios.
- Moneyness and the Profitability of Shorting Equity Options Further out-of-the-money equity option selling generally improves returns, with deep OTM puts generating 39% monthly returns versus 95% for at-the-money puts, though trading frictions may limit this advantage (multiple studies;…
- Anomalies for Building Very Short-term Trades? The most relevant research at CXOadvisory.com is...
- Are VIX Options Mispriced? VIX options appear mispriced versus spot VIX because they price off VIX futures reflecting expected expiration values, not current VIX levels, accounting for volatility mean reversion (conceptual explanation; Dec 2009…
- A Few Notes on Day Trading Options Augen argues options day trading can exploit intraday-overnight volatility distortions, noting intraday options are systematically underpriced while overnight options are overpriced (theoretical; no portfolio-level return statistics provided).
- Stock Price Clustering at Options Expiration Academic research finds stock prices cluster at option strike prices on expiration dates, with optionable stocks showing average return alterations of 16.5 basis points, attributed to market-maker hedging and potential…
- A Few Notes on The Options Trading Body of Knowledge Thomsett's 2009 options guide provides comprehensive strategy mechanics for stock options but offers unsubstantiated claims about profitability (e.g., covered calls yielding "double-digit returns even in worst-case scenarios") without backtests or…
- Strike Price Rolls for Option Writes? The post argues that rolling short option strikes to stay at-the-money enhances long-run returns only if added time premium exceeds bid-ask trading frictions and in-the-money expiration risk; no historical backtest…
- Ways to Exploit ex-Dividend Effects? US stocks drop less than dividend amount on ex-dividend day on average, but trading frictions prevent retail exploitation; only very low-cost traders like market makers can effectively capture this anomaly.
- Wash Rules on Iterative Option Writes? IRS rules involving wash sales and options as described in Publication 550 (2008) are complicated.
- Steve Sarnoff’s Advice at the “Options Hotline” Steve Sarnoff's Options Hotline recommendations favored the correct options direction only 42% of the time, with promotional gains requiring perfect hindsight (2005-2008; 141 recommendations; actual vs optimal timing).
- Turn-of-the-Month, Options Expiration and Trend Russell 2000 monthly segment effects (negative OE-to-TOTM, positive TOTM, flat TOTM-to-OE) are amplified when index is above/below 10-day SMA (Sep 1987–Apr 2009; 259 months; descriptive segmentation analysis).
- Turn-of-the-Month Effect and Option Strategy Losses Russell 2000 TOTM effect concentrates positive returns in 11.6-day turn-of-month window, with pre-TOTM averaging negative returns and post-TOTM near zero (Sep 1987–Apr 2009; 259 months; descriptive analysis for put-selling timing).
- Options Detrimental to Individual Investor Health? Individual option traders underperformed equity-only traders by 1.0% monthly risk-adjusted (2.75% net; 68,146 Dutch investors; Jan 2000–Mar 2006; driven by overreaction and high costs).
- Actual Index Options Trading Results Individual investors averaged -3.4% per trade vs foreign institutions' 14.3% per trade in Taiwan index options (2002-2005; 238,303 individuals, 50 foreign institutions); only short puts profitable for individuals.
- Correlation Variability as Driver of the Volatility Risk Premium Index options carry a significant volatility risk premium (24.7% vs 20.8% implied vs realized), while individual stock options do not, suggesting correlation shock hedging value (S&P 100; 1996-2003).
- The Why of the Volatility Risk Premium Eraker's model shows S&P 500 index options imply 19% volatility versus observed 15.7%, with volatility jumps driving consistent overpricing of out-of-the-money puts (1990-2007; theoretical model with empirical calibration).
- Effect of Stock Market Momentum on Index Options Prices ...stock market momentum tends to affect the pricing of broad equity index options such that long options become less (more) desirable for playing continuation (reversal) of strong trends.
- Volatility Premium and the Four Factors Volatility risk premium varies systematically with equity factors, with implied volatility overestimating realized volatility for small-cap, high book-to-market, and non-momentum stocks (Jan 1996–Apr 2006; 91-day ATM calls).
- Returns for Call Options on Individual Stocks Out-of-the-money one-month call options on individual stocks had negative average returns, with options more than 15% out of the money averaging -28% (Jan 1996–Jun 2005; bought at bid-ask midpoints on…
- Smirking Because They Know Something? Stocks with the least pronounced option volatility smirks (OTM put vs. ATM call implied volatility) beat those with the most pronounced by about 15% annually, risk-adjusted for market, size and…
- Extracting Disaster from Index Option Prices ...pricing of out-of-the-money put options for the S&P 500 index indicates that investors expect 50% stock market crashes every 50 years.
- Do Informed Traders Tip Their Hands Via Option Purchases? Options-based hedge strategies exploited informed trader signals, generating 0.51% weekly abnormal returns (volatility spread) and ~15% annual risk-adjusted returns (smirk strategy) (1996-2005; weekly rebalancing).
- The Volatility Risk Premium and De-biased Equity Option Returns Duarte and Jones find a volatility risk premium that increases with market volatility, with bias-adjusted S&P 500 option returns showing out-of-the-money calls have negative mean returns (1996-2005; daily data with…
- Best-of-Breed for Get-Rich-Quick Option Tips The unreal deal, as found in the cyber-alleys off Wall Street...
- Consistently Expensive Types of Equity Options Dispersion trading (long individual stock options, short index options) outperformed S&P 500 (0.63 vs 0.12 monthly Sharpe ratio after transaction costs; 1996–2004; synthetic variance swaps; 1,402 firms).
- Strategies for Investing in Options of Individual Stocks Put-selling strategies outperformed stock-only portfolios while long options underperformed (1996-2006; 213 companies; 75-90 day options held to maturity with monthly $5K incremental investments).
- Is 40% Per Month Shorting Index Puts a Fair Return? Selling one-month S&P 500 index puts generated 39% monthly returns (23% Jensen's alpha; Aug 1987-Dec 2000; unhedged strategy), though required capital reserves significantly reduce portfolio-level returns.
- Good Deals in Broad Market Index Options? Shorting near-maturity, out-of-the-money S&P 500 strangles had an annualized Sharpe ratio of 1.83 before transaction costs and margin calls, falling to 0.16 after both (CME Jan 1985–May 2001; CBOE Jan…
- Making Money with Options Based on Superior Volatility Forecasts Long-short straddles strategy targeting implied volatility mean reversion generated 15.0% monthly returns (Jan 1996–May 2005; long/short ATM straddles based on expected IV changes; all US equity options).
- The Options Trading Landscape Full-service broker customers dominate options open interest, with aggregate written positions (0.354% of shares) exceeding purchased (0.287%) and calls (0.514%) vastly outpacing puts (0.127%) (CBOE data; 1990-2001; non-market makers).
- Sell Risk to Growth Investors and Buy It from Value Investors? Value investors exhibit higher risk aversion than growth investors across return environments, with strategies selling growth options while buying value options generating positive returns (Dec 2003–Jul 2005; Russell 2000 index…
- Measuring Investor/Trader Risk Aversion The implied-historical volatility gap predicts over 15% of quarterly S&P 500 return variation, outperforming P/E and dividend ratios (1990-2005; VIX vs five-minute realized volatility).
- Can Individual Investors Enhance Returns with Options? Short-term naked option strategies (particularly selling puts and covered calls) enhanced risk-adjusted returns vs S&P 500 index (1970-2004, 1995-2004; 12 CBOE strategies as marginal investments within index portfolios).