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PROFITABILITY IN BUYING PUTS AND CALLS
Author(s) -
Hawkins Clark A.,
Halonen Robert J.
Publication year - 1973
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.1973.tb01709.x
Subject(s) - profitability index , portfolio , profit (economics) , variance (accounting) , business , selection (genetic algorithm) , yield (engineering) , modern portfolio theory , marketing , economics , microeconomics , financial economics , computer science , finance , accounting , materials science , artificial intelligence , metallurgy
It is a rather widely held view that a large majority of purchases of put and call options are unprofitable, and that the profit to be made is in writing the options. A number of authors have suggested that selling options can be a profitable adjunct to institutional portfolio management. The results of an analysis of variance factorial design of a random selection of options in various market trends, shows that only a slim majority of the options purchased would have been unprofitable. In addition, if one is able to forecast the market trend, a random selection of the proper type of options would yield a high return.