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The performance of covered calls

Record type: Article

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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Citation

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

More information

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

Catalogue record

Date deposited: 19 Jul 2006
Last modified: 17 Jul 2017 15:46

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Contributors

Author: J. Board
Author: C. Sutcliffe
Author: E. Patrinos

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