- BOX News
OIC Announces Updated Study Shows Buy-Write Strategy Outperforms Buy-And-Hold
Chicago—September 14, 2011
The Options Industry Council (OIC) today announced results and analysis of the performance of a buy-write strategy on the Russell 2000®, which found that over the 15 year period covered in the study (including the periods before, during and after the credit crisis), the buy-write strategy provided a higher return than a long RUT portfolio while reducing risk by almost 17%.
In the study, “15 Years of the Russell 2000 Buy-Write,” Nikunj Kapadia and Edward Szado from the University of Massachusetts looked at the performance of data from February 1, 1996 to March 31, 2011, concluding that a passive buy-write strategy of one month to expiration calls on the Russell 2000 consistently outperformed the index. Over 182 months, the 2% out-of-the-money buy-write returned 263% (8.87% annually), compared to the return on the RUT of 226% (8.11% annually). Furthermore, the annualized standard deviation for the entire period on the buy-write portfolio was 16.57%, almost 4 ½ percentage points lower than for the RUT portfolio.
This is an update to 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. With options volume on a growth trend in recent years, these studies show the importance of options in attaining investment goals.
To access the OIC summary, visit: oic-buy-write-strategy.pdf.
OIC is an industry cooperative funded by BATS Options, Boston Options Exchange, Chicago Board Options Exchange, C2, 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, educational websites at www.OptionsEducation.org, OptionsEducation.org/advisor, OptionsEducation.org/institutional, live seminars throughout the continental United States and Canada, instructional DVDs and educational literature.
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