What is the benefit of trading a short ATM put compared to long stock?Study:
Sold 1 ATM (50 Delta), 45 DTE, at 50%
Bought 100 shares of stock, adjsted for dividends, held to 2017
Compared cumulative performance, total ROC
We find that the performance of long stock is nearly identical to the short put over time, but the short put required 1/3 of the capital. This capital efficiency makes the case for active management, and the near-identical performance dispels the myth that options are riskier than stocks.