On October 13, we presented a scholarly view of writing covered calls and of Novavax (NVAX).
Today, we will present further scholarly reviews on writing covered calls. The October 13 post dealt with the NVAX issue. (NVAX is a bargain.)
Writing in Financial Analysts Journal, Vol. 70, No. 6, 2014, (https://ssrn.com/abstract=2444993 or http://dx.doi.org/10.2139/ssrn.2444993) in a paper titled Covered Call Strategies: One Fact and Eight Myths (October 2015), Israelov, et al describe what they call Myth 3 and that is “covered calls generate income”.
That view states that the assumption that covered calls generate income is a myth. The authors are highly qualified.
In another paper, the same authors state: “Equity index covered calls have historically provided attractive risk-adjusted returns …” (See number 5 below.)
Go figure.
The 12 papers listed below could take anyone but a financial analyst a week to digest.
- Israelov, Roni and Tummala, Harsha, Being Right is Not Enough: Buying Options to Bet on Higher Realized Volatility (September 12, 2018). Available at SSRN: https://ssrn.com/abstract=3248500 or http://dx.doi.org/10.2139/ssrn.3248500
- Israelov, Roni, PutWrite versus BuyWrite: Yes, Put-Call Parity Holds Here Too (January 13, 2017). Available at SSRN: https://ssrn.com/abstract=2894610 or http://dx.doi.org/10.2139/ssrn.2894610
- Israelov, Roni and Klein, Matthew and Tummala, Harsha, Covering the World: Global Evidence on Covered Calls (June 28, 2017). Available at SSRN: https://ssrn.com/abstract=2990522 or http://dx.doi.org/10.2139/ssrn.2990522
- Israelov, Roni and Tummala, Harsha, Which Index Options Should You Sell? (June 28, 2017). Available at SSRN: https://ssrn.com/abstract=2990542 or http://dx.doi.org/10.2139/ssrn.2990542
- Israelov, Roni and Nielsen, Lars N, Covered Calls Uncovered (October 2015). Financial Analysts Journal, Vol. 71, No. 6, November/December 2015, Available at SSRN: https://ssrn.com/abstract=2444999 or http://dx.doi.org/10.2139/ssrn.2444999
- Israelov, Roni and Nielsen, Lars N, Covered Call Strategies: One Fact and Eight Myths (August 2, 2014). Financial Analysts Journal, Vol. 70, No. 6, 2014, Available at SSRN: https://ssrn.com/abstract=2444993 or http://dx.doi.org/10.2139/ssrn.2444993
- Yang, Zhaoji George, Buy-Write or Put-Write: An Active Index Writing Portfolio to Strike it Right (May 1, 2011). Available at SSRN: https://ssrn.com/abstract=1827363 or http://dx.doi.org/10.2139/ssrn.1827363
- Kapadia, Nikunj and Szado, Edward, 15 Years of the Russell 2000 Buy-Write (September 15, 2011). Available at SSRN: https://ssrn.com/abstract=1928822 or http://dx.doi.org/10.2139/ssrn.1928822
- Hoffmann, Arvid O. I. and Fischer, Tobi, Behavioral Aspects of Covered Call Writing: An Empirical Investigation (November 1, 2010). Journal of Behavioral Finance, Vol. 13, Issue 1, pp. 66-79, Available at SSRN: https://ssrn.com/abstract=1615405
- Kapadia, Nikunj and Szado, Edward, The Risk and Return Characteristics of the Buy-Write Strategy on the Russell 2000 Index. Journal of Alternative Investments, Spring 2007, Available at SSRN: https://ssrn.com/abstract=966287
- Chaput, J. Scott and Ederington, Louis H., Option Spread and Combination Trading (January 2002). Available at SSRN: https://ssrn.com/abstract=296036 or http://dx.doi.org/10.2139/ssrn.296036
- Brandão Fernandes, Ana Cristina and Machado dos Santos, Carlos, Evaluation of Investment Strategies with Options . Available at SSRN: https://ssrn.com/abstract=313978 or http://dx.doi.org/10.2139/ssrn.313978
With a much simpler way of understanding, investors can get excellent results by following the method described on out post titled How to benefit from volatility the Monday Morning Millionaire Program way
With the habits of the Monday Morning program, luck hardly matters.
Good luck!
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