Even driving a car can be extremely dangerous when you don't understand what you're doing. And options may be safe when you know where you're going.I've never heard/read John Bogle suggest using options. Active traders do have that option.First off, to be honest a give a ?!&% on whether something is "approved" by bogleheads or not. I only go by verifiable evidence, not by some gospel. There are some quite big, almost religious believes and doctrines in this forum, along with citations of whatever "godfather" said decades ago or at a senile age, be it only in a side sentence and often out of context.Can you provide the source that shows call writing was profitable? I'm not challenging the assertion, but I'd like to see what and when those results were. I would have thought that calls were actually underpriced a bit because covered call writing is a popular way to juice your stock holdings. I do it and it has been profitable even though I don't do it in a very systematic manner.The historical returns were positive for call options writing too, which cannot be interpreted as "insurance" against the stock market risk...
...I hear that retail brokers make a ton of money in commissions and spreads from uneducated retail investors trading options though...
...Coincidentally or not, I have not come across any institutional investor or hedge fund engaging in such a strategy; only retail investors.
As for retail brokers making a ton of money on hapless retail options traders, the fees at most online brokerages are pretty minimal and I only really have to consider them when I'm trading very low value options.
QYLD, XYLD and RYLD are examples of covered call ETFs. As to what hedge funds or large family offices are doing, how would we know?
As for convincing you to use an options overlay, I'll just say that it is a lot of work and not really compatible with Bogle-ish investment strategies.
The ETFs are retail oriented and often follow herd behavior and popular hypes. I normally come across what institutional investors and hedge funds are doing, including alternative assets and strategies, as I did a lot of reading. Never came across options writing.
The study by CBOE of their options writing indexes are on their web site, and show better risk-adjusted returns than the stock market; however like I said, the historical timeframe of options is naturally limited, and I have not seen any academic study suggesting continued outperformance.Since I'm not an active trader, nor am I a Gordon Gekko type, I stay away from these risky bets.Vanguard offers self-directed investors the ability to trade options, but you'll first need special permission. Options provide unique opportunities to hedge risk or generate income, but they can be highly risky.
Assuming that options are a coin toss biased in favor of the seller, selling lots of small options and over time must bring an excess return to the sellers of the options.
Statistics: Posted by y1980 — Wed Jun 05, 2024 1:16 am — Replies 32 — Views 3233