Still Not Cheap: Portfolio Protection in Calm Markets

25 Pages Posted: 17 Mar 2015 Last revised: 27 Jan 2017

Date Written: March 16, 2015


Recent equity volatility is near all-time lows. Option prices are also low. Many analysts suggest this represents a good opportunity to purchase put options for portfolio insurance.

It is well-known that portfolio insurance is expensive on average, but what about in calm markets? History suggests it still is. We investigate the relationship between option richness and volatility across ten global equity indices. Option prices may be low, but their expected values tend to be even lower.

Keywords: Options, Protection, Portfolio Protection, Tail Protection, Tail Risk, Volatility Risk Premium, Variance Risk Premium, PutWrite, Put-Write, BuyWrite, Buy-Write, Covered Call, Covered Calls, Call Overwriting, Overwriting

JEL Classification: G00, G10, G11, G12, G13

Suggested Citation

Israelov, Roni and Nielsen, Lars N, Still Not Cheap: Portfolio Protection in Calm Markets (March 16, 2015). Available at SSRN: or

Roni Israelov (Contact Author)

NDVR, Inc.

24 Federal Street
Boston, MA 02110
United States


Lars N Nielsen

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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