Callan_CBOE.pdf (application/pdf Object)
This link came courtesy of Miller Tabak. The basic take away is that the indexed buy-write strategy has close to market returns during most periods, lags by lot during big up moves and outperforms by a lot during big down turns.
I have been constructive on the concept for a long time and writing about the CEFs that sort of do this for a long time as well.
No doubt someone will leave a comment pointing out the flaws, of which there are several. Nonetheless, used in moderate proportion (I weigh these at 3-4% for clients) they offer utility, IMO.
I would like to see any of the ETF providers create funds that benchmark the various indices around the world that capture the buy-write trade.
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2 comments:
It's impressive analysis and it left me much more in favour of buy-write as a strategy. The think I still don't like is that you're giving away most of the upside potential which is, to me, one of the big advantages of owning stocks.
Yes, it out-performs when the market is going down, but selling a bad position outperforms buy-write.
I'm afraid I still don't see it as a particularly productive strategy.
Richard
Roger, (or any options experts)
I had an options question that is loosely related but can't seem to find a solid answer.
If you are long a call on a company and it:
1. Declares a special dividend (many cash rich firm with not many re-investment opportunities) or
2. Announces a spin out (e.g. Altria)
How is the option holder effected. Do they adjust the strike or is the option holder left out in the cold.
Thanks!
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