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Abstract
Investors have always tried to use various trading strategies to juice their returns. Writing options has often been thought of as a low risk way to get some additional income (premiums) while not disturbing the underlying asset allocation. Sometimes, however, investors are caught off guard when their option strategy does more harm than good. In this educational piece we describe one of the most common option writing strategies, covered call writing, and the practicalities of how to manage these strategies so they hopefully don’t backfire. The key is to recognize that the returns from covered call strategies are related to the volatility risk premium (also known as the variance risk premium) as well as the equity risk premium.
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Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600