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Market Measures

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A Review of Puts

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Often we talk about how utilizing options can lead to a better risk/reward outcome than simply holding stock.

Today we are going to do an in-depth discussion of selling puts compared to buying and holding stock over a 45-day period.

  • SPY, 2005 - present
  • 45 days to expiration
  • Selling 5∆, 16∆, 30∆, 50∆ puts
  • Buying and holding 100 shares of SPY
  • Managed at expiration and 21 days to expiration
  • Compared to high volatility environments
  • High IV is VIX over 18

We find that by managing puts early, we can achieve a better risk/reward profile than just holding stock, and by selling in higher IV, we have a better opportunity of making money.

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