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Options‐based benchmark indices—A review of performance and (in)appropriate measures
Author(s) -
Natter Markus
Publication year - 2018
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21865
Subject(s) - benchmark (surveying) , profitability index , portfolio , econometrics , computer science , sample (material) , investment (military) , actuarial science , economics , financial economics , finance , chemistry , geodesy , chromatography , politics , political science , law , geography
This paper reviews the performance and profitability of different option strategy benchmark indices provided by the CBOE. Using different performance approaches, I show that performance measurement of these indices is highly complex and sensitive to the model choice. Moreover, this study controls for time‐varying delta exposure via linear timing approaches and uses a linear option‐factor model that is independent from the portfolio composition. Splitting the sample, I find that outperformance reported by previous studies is mostly driven by limited data. Moreover, the profitability of option strategies for private investors is evaluated based on easily investable investment products.