Selling Options to Beat the Market: Further Empirical Evidence

33 Pages Posted: 15 Feb 2023

See all articles by Alejandro Balbás

Alejandro Balbás

Charles III University of Madrid

Gregorio Serna

University of Alcala


Brownian-motion-linked pricing models predict the existence of derivatives whose value at risk in short positions is lower than their price. The derivative sale plus the price investment in riskless assets becomes self-financing with negative risk. Repeating over and over this strategy, the price remains zero, but the risk tends to minus infinity. This paper reports results of empirical studies about the performance of this strategy. The American SP-500 and the German DAX-30 are involved. In both cases the index is beaten by simple buy and hold strategies containing riskless assets and short options. This finding may be interesting to practitioners and theoretically relevant. Firstly, the market can be beaten in an orthodox way, since results of Financial Economics inspire the methodology. Secondly, the risk never tends to minus infinity in practice. Perhaps the theoretical behavior in tails of Brownian-motion-linked models should be revisited.

Keywords: Downside risk measure, derivative market, buy and hold golden strategy, outperforming benchmarks, Market Efficiency

Suggested Citation

Balbás, Alejandro and Serna, Gregorio, Selling Options to Beat the Market: Further Empirical Evidence. Available at SSRN: or

Alejandro Balbás

Charles III University of Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903

Gregorio Serna (Contact Author)

University of Alcala ( email )

Plaza de la Victoria, 2.
Alcala de Henares, Madrid 28801

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