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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.

We recently showed how using a covered call can improve the performance of a buy and hold approach with index investing. The simple covered call improved cumulative returns and had lower portfolio volatility.

Since the time needed to trade a Covered Call is minimal and we’re only making trades roughly once per month, can we further improve performance with a more active approach? Today, we’ll look at the performance of selling and managing the covered call.

The Study:
  • SPY
    • $1,000,000 Account
    • 2005 – 2017
    • Sold 16 delta Covered Calls with 45 DTE
  • Compared Strategies:
    • 16 Delta Covered Call Managed at 21 Days
    • Long SPY (ETF)
    • Long VFINX (Mutual Fund)
The Results:

When we manage the covered call at 21 days, we again outperform the passive buy and hold approach as well as the un-managed covered call. However, the managed position provides greater returns and lower portfolio volatility than the un-managed position.

Tune in as Tom and Tony interpret the results further and apply it to tastytrade's mechanical approach to options trading.

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