The "One" Research Report that'll change your view on Options
PUT index's performance from June 1986 to December 2018. The PUT index delivered a comparable annual compound return (9.54%) to the S&P 500 (9.80%) but with substantially lower volatility, as indicated by its standard deviation (9.95% vs. 14.93%).
No nonsense.. I'll get straight to the point here.
This one research report changed my view on how I view markets and exposure to the Index, and frankly, got me convinced that selling options contracts was worth the investment.
I'm talking no other than:
"The Historical Performance of Put-Writing Strategies"
- OLEG BONDARENKO UNIVERSITY OF ILLINOIS AT CHICAGO
If you didn't download and read the full report, just read this instead:
PUT index's performance from June 1986 to December 2018.
The PUT index delivered a comparable annual compound return (9.54%) to the S&P 500 (9.80%) but with substantially lower volatility, as indicated by its standard deviation (9.95% vs. 14.93%).
This translates to a superior risk-adjusted return, with the PUT index achieving a Sharpe ratio of 0.65 compared to the S&P 500's 0.49.
Furthermore, the PUT index demonstrated lower downside risk, experiencing a smaller maximum drawdown (-32.7% vs. -50.9%) and a shorter longest drawdown period (40 months vs. 73 months) than the S&P 500.
Comparable returns with 33% less volatility in the portfolio. Wow...
This is no isolated report either, over a 28 year period of economic chaos.
1987 - Black Monday
1990s Recession
2000 - Dot Com Bubble
September 11 Attacks, 2001
2008 Global Financial Crisis & Bear Market
2010 Flash Crash
and everything else in-between, including some of the greatest bull market runs in history:
1987-2000 Tech Boom (Largest Bull market in US History)
Post GFC Bull Market (Second Largest Bull market in US Histroy)
I think that says enough..
What is the PUT Index?
Simply, the PUT Index is a strategy that sells at-the-money put options on the SPX (S&P500 Index), and uses the premium collected to sit in risk-free-rate products (ie US treasuries).
Further Information can be found here:
https://www.cboe.com/us/indices/dashboard/put/
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