Better Portfolios with Options

16 Pages Posted: 8 Nov 2012 Last revised: 12 Nov 2012

See all articles by Gerda Cabej

Gerda Cabej

University of Geneva

Manfred Gilli

University of Geneva - Research Center for Statistics; Swiss Finance Institute

Enrico Schumann

Independent

Date Written: November 11, 2012

Abstract

As a result of the recent financial crises, equity markets have performed poorly in the last five years or so. In consequence, equity long-only strategies have generally been unattractive over this period. This motivates the investigation on whether better performance can be achieved by including equity options in the portfolios. We show that simple systematic option strategies improve portfolio performance. Results are supported by thorough backtesting and simulations.

Keywords: Option Overwriting, Delta-Hedging, Volatility trading, Portfolio Optimization, Optimization Heuristics

JEL Classification: G11, C61, C63

Suggested Citation

Cabej, Gerda and Gilli, Manfred and Schumann, Enrico, Better Portfolios with Options (November 11, 2012). Available at SSRN: https://ssrn.com/abstract=2171774 or http://dx.doi.org/10.2139/ssrn.2171774

Gerda Cabej

University of Geneva ( email )

102 Bd Carl-Vogt
Genève, CH - 1205
Switzerland

Manfred Gilli (Contact Author)

University of Geneva - Research Center for Statistics ( email )

Geneva
Switzerland
+41223798222 (Phone)
+41223798299 (Fax)

HOME PAGE: http://www.unige.ch/ses/metri/gilli/

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Enrico Schumann

Independent ( email )

No Address Available

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