The performance of covered calls


Board, J., Sutcliffe, C. and Patrinos, E. (2000) The performance of covered calls. European Journal of Finance, 6, (1), 1-17. (doi:10.1080/135184700336937).

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Original Publication URL: http://dx.doi.org/10.1080/135184700336937

Description/Abstract

Writing call options against long positions in the underlying equities is the most popular options strategy. Since the variance is an inadequate measure of risk for options strategies, this paper uses a range of dominance criteria and four utility functions to compare the performance of partly and fully covered call strategies with that of the underlying equity portfolio. It is found that the dominance criteria are ineffective in choosing between strategies. However, all four utility functions (representing different combinations of absolute and relative risk aversion) find that the covered call strategy is preferable for the data period studied, supporting the widespread use of this strategy.

Item Type: Article
ISSNs: 1351-847X (print)
Related URLs:
Keywords: call options, covered calls, buy-writes, overwrites
Subjects: H Social Sciences > HG Finance
H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Divisions: University Structure - Pre August 2011 > School of Management
ePrint ID: 35952
Date Deposited: 19 Jul 2006
Last Modified: 27 Mar 2014 18:22
URI: http://eprints.soton.ac.uk/id/eprint/35952

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