If the study were updated today, I bet selling out-of-the-money puts would be the number one options strategy. This is probably because the study does not include the horribly bearish 2008-09 stock market period. I'm not surprised that selling puts is the most profitable options strategy, but I'm a bit surprised that selling in-the-money puts is the best strategy. Below is an excerpted reproduction of the study's table 2 for options that have fixed three-month expirations during both 10-year and 22-year holding periods:Īnnualized Return: 10-Year Holding PeriodĪnnualized Return: 22-Year Holding Period This study supports my strategy of selling puts with 2- to 5-month expirations and buying LEAP call options with one year or longer expirations. At fixed 12-month or longer expirations, buying call options is the most profitable, which makes sense since long-term call options benefit from unlimited upside and slow time decay. Table 2 on page 27 of the 2006 study ranks option strategies in descending order of return and selling puts with fixed three-month or six-month expirations is the most profitable strategy. When three-month options are used, written put portfolios for all moneyness levels (OTM, ATM, ITM) generate high returns and exhibit positive abnormal performance. However, some option portfolios exhibit risk-adjusted performance which exceeds that of the benchmark stock-only portfolio. In agreement with previously presented results and prior literature, many option portfolios have risk-adjusted performance worse than the benchmark portfolio. The 2006 study states on pages 17 and 22-23 (emphasis added):
Two academic studies - one from 2006 and a more recent one from 2012- ack up my opinion regarding the superiority of the put-selling option strategy, concluding that while many option strategies lose money, put selling is one of the few option strategies that outperforms a buy-and-hold stock portfolio. Furthermore, limiting the margin requirement by selling put spreads instead of naked puts substantially increases the trade's rate of return. The win rate is very high, because we can make money even if the stock remains stagnant or even falls a modest amount. We always try to be extremely nimble in how we think about these things,” he said.As many of my readers know, my favorite option strategy is to sell out-of-the-money put credit spreads. If the world looks more difficult, we’ll adjust accordingly. “I can’t tell you what the world’s going to look like in six months. Solomon ended the interview with caution. Solomon previously said on Goldman’s second-quarter earnings call with investors on Monday that inflation is entrenched in the economy and it may not come down in the second half of the year. Solomon said inflation is “definitely not transitory” and is here to stay. However, Goldman Sach’s Solomon doesn’t see inflation coming back down. Even crude oil, which shot above $140 a barrel after the war in Ukraine broke out, has been steadily dropping as traders fear a recession might bring on demand destruction. Fink argues commodity prices have dropped since the start of the year and supply chains, which were snarled as the world exited the global pandemic, have improved.Ĭommodities like copper and lumber, which both soared in 2021, have dropped by 21% and 41% since the start of the year.
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industry produce goods domestically and the tightening of legal immigration, has made inflation worse.īut Fink argues that despite rising prices, underlying demand has stayed unchanged and supply is improving. Jim fink options strategy how to There are a great deal of wonderful investing books written by extremely effective financiers that are chock-full of useful pointers, informative details, and inside understanding on the world of Wall Street. The BlackRock CEO has long argued that nationalistic policy-making, like the push to make U.S. A lot of it is policy generated,” Fink said. Speaking on CNBC’s Jim Cramer’s Mad Money on Wednesday, Fink said, “A really famous person called me up, panicking, ‘what should I do, I’ve got to get out, I can’t stand it, I can’t stand it.’ And I said, ‘go on vacation.’”
The odds of a recession are high, especially after the three outsized rate hikes seen this year, Solomon said, noting, “anytime you have high inflation and go through an economic tightening, you wind up having some sort of an economic slowdown.”īut as Solomon flashes warning signs about the state of the economy, BlackRock CEO Larry Fink is taking a very different tack-calling the economic headwinds currently roiling markets “business as usual” for long-term investors. Solomon, speaking to CNN‘s Poppy Harlow, said people should begin preparing for an environment of higher inflation, adding, “there’s a good chance that we haven’t quite reached the peak yet.”
Goldman Sachs chief executive David Solomon is warning of trouble ahead, urging people to prepare for worsening inflation and an approaching recession.
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