Stats › Volatility and VIX › Variance risk premium
Selling S&P 500 puts returned 7.0% against the index's 11.0%
| Index | Return since inception | Volatility | Maximum drawdown |
|---|---|---|---|
| Put write, from Jan 2007 | 7.0% | 10.8% | -32.7% |
| S&P 500, same period | 11.0% | 15.5% | -50.9% |
| Buy write, from Jun 1986 | 8.5% | 10.7% | -35.8% |
| S&P 500, same period | 11.2% | 15.2% | -50.9% |
Both writing strategies delivered around two thirds of the volatility and a smaller drawdown, and both trailed the index. Source: Cboe index factsheets.
Options are priced as though the market will be more volatile than it turns out to be, by about four percentage points. Cboe's put writing index still returned 7.0% a year since 2007 against the S&P 500's 11.0%. That is volatility reduction, not return enhancement.
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