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Market Measures

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Short Put or Long Call?

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.

Both selling a put and buying a call enable us to enter a stock position in a more capital efficient way. Although the defined risk can limit the maximum losses of long call strategies, the short puts strategies can give a higher average P/L and win ratio (at the cost of unlimited potential max losses).

Our study on SPY shows that when holding to expiration, the average P/L and win ratio of short ATM Puts are both significantly higher than long calls whether they are OTM, ATM of ITM. And if we manage earlier than 21 DTE, the relationship still holds, because short put strategies still outperform long call strategies in all measurements.

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