- BOX News
OIC Announces Latest Study Findings Showing Collar Strategy Improves Performance And Reduces Risk
CHICAGO—May 3, 2012
The Options Industry Council (OIC) today announced that new research shows collar strategies provide portfolios with greater downside risk protection than standard multi-asset diversification programs, significantly reducing volatility, drawdowns and, in certain market environments, providing enhanced returns relative to a stand-alone investment.
In contrast to earlier studies which concentrated on equity markets, Edward Szado and Thomas Schneeweis of the University of Massachusetts provide extensive analysis of the performance of collar strategies over a diverse set of asset classes including equities, currencies, commodities, fixed income, and real estate in their recent research, Option-Based Risk Management in a Multi-Asset World. The research covers the period from June 1, 2007 to December 30, 2011, capturing both the financial crisis as well as the following market recovery.
An example of the benefit of an equity collar strategy can be seen with the analysis on the popular SPDR S&P 500 (SPY) ETF. Over the study period, the 2% out-of-money SPY collar returned over 22% while the long SPY experienced a loss of over 9%. The collar earned its superior returns with less than half the risk as measured by the standard deviation (8.4% for the collar versus 19.5% for SPY).
The expanded findings are a continuation of one 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 educational institutions, OIC remains committed to its mission of providing education and research to institutional investors. These studies show the importance of options in attaining investment goals.
To access the OIC summary, visit:
To access the complete research, visit:
OIC is an industry cooperative funded by BATS Options, BOX Options Exchange, Chicago Board Options Exchange, C2 Options Exchange, International Securities Exchange, NASDAQ OMX PHLX, NASDAQ Options Market, NYSE Amex Options, NYSE Arca Options and OCC. OIC was formed in 1992 to educate investors and their financial advisors about the benefits and risks of exchange-traded equity options. OIC's resources include: Investor Services live help at 1-888-OPTIONS, its educational website at www.OptionsEducation.org, live seminars throughout the continental United States and Canada, and educational literature.
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