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The Options Industry Council Announces A New Study Finds Greater Returns, Less Volatility Using Collar Strategy
Chicago—May 1, 2008
The Options Industry Council expanded its educational efforts designed for institutional investors by providing support for a study of the performance of a passive collar strategy on the PowerShares QQQ ™ exchange-traded fund (ETF). The results show that returns on the strategy can outperform the index.
“Collaring the Cube: Protection Options for a QQQ ETF Portfolio,” by Edward Szado and Hossein Kazemi, looked at data from March 1999 to March 2008. The study demonstrated that a passive collar strategy using a six month put purchase and consecutive one month call writes provided greater returns compared with buying and holding the NASDAQ-100 Index® ETF with about one-third of the index volatility. Over the 108 month study period, this collar strategy returned more than 150 percent, cumulatively, while the cube portfolio lost over 12 percent. The study was conducted by the Isenberg School of Management's Center for International Securities and Derivatives Markets (CISDM) at the University of Massachusetts.
This is the second in a series of studies intended for institutional investors which evaluate the performance of different options strategies on different contracts over specific time periods. By supporting these studies in conjunction with well-respected research and education center CISDM, OIC is dedicated to its mission of providing education and research to institutional investors. With options volume skyrocketing in recent years, these studies show the importance of options in attaining investment goals. The study is available to all investors at www.optionseducation.org/institutional.
“OIC is pleased to support research studying the performance of particular options strategies in order to provide institutional investors necessary tools to participate in this marketplace,” said Gina McFadden, President of OIC. “In this case, ‘Collaring the Cube' gives institutional investors valuable information about hedging—an important consideration in today's environment.”
OIC is an industry cooperative funded by the American Stock Exchange, Boston Options Exchange, Chicago Board Options Exchange, International Securities Exchange, NYSE Arca, Philadelphia Stock Exchange and The Options Clearing Corporation. OIC's resources include: The Options Industry Services Help Desk at 1-888-OPTIONS, educational Web sites at www.optionseducation.org and www.OICoptions.com , evening seminars throughout the continental United States and Canada, instructional DVDs and educational literature and software.
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