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Put Selling

  • Michael J. Oyster
Chapter

Abstract

Oyster describes the Volatility Risk Premium (VRP) as perhaps the most significant, untapped resource available to investors today. Systematic put selling or writing strategies offer investors a means to monetize that resource at low cost and historical data makes a strong case for relative outperformance compared with US equity benchmarks. Oyster analyzes the past performance of the Cboe S&P 500 PutWrite Index (PUT) recognizing that PUT underperformance versus the S&P 500 Index occurred during especially bullish stock market periods and that PUT outperformed when the S&P 500 posted below-average returns. Oyster also describes put-call parity and offers an explanation of why the PUT has outperformed the Cboe S&P 500 BuyWrite Index (BXM) when the two have identical payoff profiles.

Copyright information

© The Author(s) 2018

Authors and Affiliations

  • Michael J. Oyster
    • 1
  1. 1.Chief Investment StrategistCincinnatiUSA

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