May 2019

New Study: Listed Index and ETF Option Overlays May Improve Endowment Performance

CHICAGO (May 1, 2019) – The Options Industry Council (OIC), an industry resource provided by OCC, the world’s largest equity derivatives clearing organization, today shared the results of a new study, Endowment Risk Management and Return Enhancement with Listed Index and ETF Options, that found that both buy-write and put spread collar overlays improved risk-adjusted performance within the study sample for small, mid-sized and very large endowments, with the small endowment portfolio seeing the largest benefits.

The research study, commissioned by OIC, was conducted by Dr. Edward Szado, Associate Professor of Finance at Providence College School of Business. Dr. Szado researched historical returns for three hypothetical endowment portfolios based on the historical time series of average asset allocations of small (<$25 million), mid-sized ($100-500 million) and very large (>$1 billion) endowments reported in the NACUBO-Commonfund Study of Endowments. To assess the impact of the options-based strategies, the equity allocations of the hypothetical endowments were replaced with Nasdaq QQQ or NDX buy-write or put spread collar strategies.

According to the study, buy-writes on the QQQ and NDX provided meaningful increases in returns relative to the corresponding underlying. The improvements in raw annualized returns averaged 2.4 percent, while standard deviations were reduced by an average of 5.8 percent. The put spread collar implementations provided slightly less return improvements than the buy-writes, while providing larger reductions in standard deviations.

The study concluded that QQQ and NDX buy-write and put spread collar endowment overlays improved risk-adjusted performance for small, mid-sized and very large endowments, with the largest benefits occurring for the small endowment portfolio. While the return improvements were relatively small from an annualized return perspective, these improvements were averaged over a period of 18-plus years, so the cumulative impact was meaningful. Furthermore, the reductions in standard deviations and maximum drawdowns were also economically significant.

“OIC has been at the forefront of educating investors on the benefits and risks of using equity and index options to help manage their financial risk since 1992. We are pleased to support the industry’s education and research initiatives, which plays a critical role in driving continued growth within the listed options markets,” said Paul Finnegan, OIC Vice President Education. “OIC offers un-biased educational resources for investors and professional money managers seeking to implement derivatives-based strategies within their portfolios. This new study will help increase the level of awareness of the potential value of using listed options by investors.”

For in-depth analysis of the results and breakouts by both endowment size and overlay strategy, read the full study.

Media Contact:
David Prosperi

About OIC
OIC is an industry resource provided by OCC, the world’s largest equity derivatives clearing organization. Its mission is to provide free and unbiased education to retail investors, financial advisors and institutions about the benefits and risks of exchange-listed options. OIC offers education which includes webinars, online classes, podcasts, videos, investing tools, and live help. OIC’s Roundtable is OIC’s advisory group and is comprised of representatives from the exchanges, member brokerage firms and OCC. For more information on the educational services OIC provides for investors, visit

About OCC
OCC is the world's largest equity derivatives clearing organization and the foundation for secure markets. Founded in 1973, OCC operates under the jurisdiction of both the U.S. Securities and Exchange Commission (SEC) as a registered clearing agency and the U.S. Commodity Futures Trading Commission (CFTC) as a Derivatives Clearing Organization. Named 2019 Best Clearing House by Markets Media, and 2018 Clearing House of the Year – The Americas by FOW, OCC now provides central counterparty (CCP) clearing and settlement services to 20 exchanges and trading platforms for options, financial futures, security futures, and securities lending transactions. More information about OCC is available at

A Service Of:

  • OCC

OIC Participant Exchanges:

  • BOX
  • Cboe
  • MIAX
  • Nasdaq
  • NYSE

OCC 125 South Franklin Street, Suite 1200 | Chicago, IL 60606

This web site discusses exchange-traded options issued by The Options Clearing Corporation. No statement in this web site is to be construed as a recommendation to purchase or sell a security, or to provide investment advice. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of this document may be obtained from your broker, from any exchange on which options are traded or by contacting The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606.

©1998-2020 The Options Clearing Corporation - All rights reserved.

User acknowledges review of the User Agreement and Privacy Policy governing this site. Continued use constitutes acceptance of the terms and conditions stated therein.