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A Simple Options Trading Strategy That Beats the S&P 500

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 sebastien bossu, Principal at Ogee Group LLC

 Tuesday, August 5, 2014

Happy to hear any feedback! :)


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5 comments on article "A Simple Options Trading Strategy That Beats the S&P 500"

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 Grigoriy Isaev, CFA

 Wednesday, August 6, 2014



The "strategy" is as old as the hills. Selling ATM put on the same delta basis outperforms buy and hold in the long run and commands a slightly higher sharpe ratio. The problem is that for investors who would even consider this strategy (buy and hold) it does not make sence because of the taxes. If you simply buy and hold you have few realized gains and pay mostly dividend taxes. If you trading full retard you will get a hefty tax bill. So this make sence only for tax excempt accounts. And it is not suitable for hedgefunds etc since after 2+20 it wouldn't be that good.


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 Mohsen Mazaheri, Director at Barclays Capital

 Wednesday, August 6, 2014



Why exclude dividends on the S&P? Over a longer period of time like a few years as in the examples graphed it will have a significant effect on the cumulative wealth.


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 Richard Camp, Manager, Client Education at Intuition Publishing

 Wednesday, August 6, 2014



A friend of mine did some work on this and came to the same conclusion. Although you do see bad periods like 1987, the vol tends to pick up so you get more premium in downturns which offsets the index move. As far as I am aware the hedge fund he works with is using this as a strategy.


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 sebastien bossu, Principal at Ogee Group LLC

 Thursday, August 7, 2014



@Mohsen: We didn't include dividends in SPX nor interest on capital in the strategy to keep things simple and easier to reproduce. This is only a 2-page article.


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 sebastien bossu, Principal at Ogee Group LLC

 Friday, August 8, 2014



Someone just pointed out to me that there's already an index tracking this strategy: http://www.cboe.com/micro/put/



My article provides a theory to explain why this strategy works.

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TRADING FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS AND IS NOT SUITABLE FOR ALL INVESTORS
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