A simple short put strategy can seem risky at first, but looking at past performances and volatility around it tells a very different story.Study
- SPY, 2005 - present
- Sold 1 ATM put continuously, managed at 50% of max profit or held to expiration
- Bought 100 shares of stocks and adjusted for dividends.
- Compared cumulative performance volatility of P/L
It turns out that the put strategy performs nearly the same as the long stock but carries only half the volatility. This suggests that options can be a safer bet than carrying stock.