The Cash-secured PutWrite Strategy and Performance of Related Benchmark Indexes

Options‐based benchmark indices—A review of performance and (in)appropriate measures

“…8 Since historical data begin and end at different dates, I limit the sample period to February 1990 to the end of 2016 to obtain a comprehensive but comparable sample. Consistent with the literature on performance measurement of option-based benchmark indices, I compare the option strategies to the underlying index and investment products on benchmark indices (see, e.g., Ungar & Moran, 2009;Whaley, 2002). Since I consider only option strategies on the S&P 500, the S&P 500 total return index (SP500TR) serves as the primary benchmark.…”

“…The outperformance of 2.76% on an annualized basis is both statistically and economically significant. Ungar and Moran (2009) have a longer time frame available and their estimate for BXM's outperformance is 1.92% p.a. It seems that the outperformance diminishes with longer windows analyzed and thus, I naively divide my sample into two equally long sub-samples.…”

“…So far, there are many studies attesting superior performance for CBOE's strategy benchmark indices (e.g., Ungar & Moran, 2009;Whaley, 2002). The first index published was the BXM BuyWrite Index, which is a simple passive covered call strategy that is long the S&P 500 and sells 1-month call options on the underlying index.…”

“…Moreover, this paper uses a long time horizon as well as different time windows for each strategy index, and introduces novel approaches, for example, conditional factor models, to measure the performance of portfolios containing options.So far, there are many studies attesting superior performance for CBOE's strategy benchmark indices (e.g., Ungar & Moran, 2009;Whaley, 2002). Using different performance approaches, I show that performance measurement of these indices is highly complex and sensitive to the model choice.…”

“…To the best of my knowledge, I am the first to measure the performance of a large number of benchmark indices instead of exclusively one strategy. Moreover, this paper uses a long time horizon as well as different time windows for each strategy index, and introduces novel approaches, for example, conditional factor models, to measure the performance of portfolios containing options.So far, there are many studies attesting superior performance for CBOE's strategy benchmark indices (e.g., Ungar & Moran, 2009;Whaley, 2002). The first index published was the BXM BuyWrite Index, which is a simple passive covered call strategy that is long the S&P 500 and sells 1-month call options on the underlying index.…”