The performance of covered calls
The performance of covered calls
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.
call options, covered calls, buy-writes, overwrites
1-17
Board, J.
3ee6543a-c316-41b4-b89a-0e761e0447ce
Sutcliffe, C.
95f94790-b30c-428a-b1d4-4fc9d1555dfe
Patrinos, E.
5cfd14c4-ed89-45e1-89be-d80a733c3414
2000
Board, J.
3ee6543a-c316-41b4-b89a-0e761e0447ce
Sutcliffe, C.
95f94790-b30c-428a-b1d4-4fc9d1555dfe
Patrinos, E.
5cfd14c4-ed89-45e1-89be-d80a733c3414
Board, J., Sutcliffe, C. and Patrinos, E.
(2000)
The performance of covered calls.
European Journal of Finance, 6 (1), .
(doi:10.1080/135184700336937).
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.
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Published date: 2000
Keywords:
call options, covered calls, buy-writes, overwrites
Identifiers
Local EPrints ID: 35952
URI: http://eprints.soton.ac.uk/id/eprint/35952
ISSN: 1351-847X
PURE UUID: 1494f164-6101-4c00-bb4e-d2baea5d26bc
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Date deposited: 19 Jul 2006
Last modified: 15 Mar 2024 07:55
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Author:
J. Board
Author:
C. Sutcliffe
Author:
E. Patrinos
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