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The Power of Active Investing

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.

Passive investing (in products like Mutual Funds and ETFs) is occupying a pretty large portion of investing activity in the US. These passive trades can closely track a benchmark index and their cost is seemingly small. But according to our study on SPY, these "low cost," passive trades are even less competitive than a simple covered call.

Our study shows that an SPY 16-delta covered call with 45 DTE has generally outperformed the long SPY passive position and VFINX. Including all fees, commissions, etc., the covered call generated greater return and lowered risk. Thus, the results of our study back up our preference towards active investing.

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