by Mike Scanlin

The Institute For Global Asset And Risk Management (INGARM) released a new study today called Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs. Two PhDs, Keith Black and Edward Szado, studied 119 mutual funds that use options and analyzed their risk-adjusted performance. Some have used options since 1988.

Growth In Number Of Mutual Funds That Use Options

The number of Options-Based Funds grew from 10 in 2000 to 119 in 2014:

Key Findings For Options-Based Funds

The study performed an analysis of the equal-weighted performance of 80 Options-Based Funds that focus on use of U.S. stock index options and/or equity options during the 15-year period from 2000 through 2014, and had two key findings:

(1) Higher risk-adjusted returns. The Options-Based Funds had similar returns as the S&P 500 Index with lower volatility and lower maximum drawdowns. Said another way, the Options-Based Funds had higher risk-adjusted returns, as measured by the Sharpe Ratio, Sortino Ratio, and Stutzer Index. In addition, using the S&P 500 as a base, the Options-Based Funds and the CBOE BuyWrite Index BXM had better risk-adjusted returns using 3 measures:

(2) Strong performance for benchmarks that use SPX index options. From mid-1988 to the end of 2014, the CBOE S&P 500 2% OTM BuyWrite Index had higher returns and lower volatility than the S&P 500 Index. Here are the standard deviations, where a smaller number is better (less volatility):

Download The Study

To see more data, download the 30-page study as a PDF file: Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs.

List Of Closed End Funds (CEFs) That Use Options

List Of Exchange Traded Funds (ETFs) That Use Options

List Of Mutual Funds That Use Options

Mike Scanlin is the founder of Born To Sell and has been writing covered calls for a long time.