Does selling index options offer above average risk adjusted returns?

[Daal]

Let me add another data series. This ETF sells naked puts on the 20 most volatile stocks (i.e highest implied vol) at 85% of cash value. So again, no leverage here and slightly below one to one. Interesting concept. We have two years of performance to look at. Their target is to earn 10% a year which is actually pretty good.

As you can see, they were pretty much on target in 2014 and 2015 until August. Then in one month they gave back 100% of what they made the last two years.

Again, all I'm doing here is trying to show actual data of the actual performance of these strategies in an execution environment vs hypothetical. Once you strip out the leverage, the numbers really aren't there. The performance curve in almost all cases "are" smoother though. But the ride down is always the same.

I believe they paid out 10% a year in dividends in this period

 

[TD80]

I believe they paid out 10% a year in dividends in this period

Total return I see (factoring in divs) since inception is 5.89% or an annualized return of 2.29%. Obviously these numbers were better before this latest mini-crash. That is before any fees...

 

[Chubbly]

I'm not referring to just returns but risk adjusted returns that are above similar investment opportunities. I'm not really well read in options but it appears to me that some folks like to consistently sell index options on the belief that on average it will be a good bet. It probably is but they are forced to 'stay small' because of risks associated with tail events. Lets say such strategy generates 10-20% a year and the drawdowns are around 50-60% when a tail event hits. These numbers seem to be quite similar to being long emerging market equities so there doesn't seem to be much benefit of such approach. Am I wrong for thinking like this? If there are superior risk adjusted returns, why wouldn't hedge funds be all over this strategy and compress its returns down to other similar vehicles? It seems a very easy strategy to apply psychologically so I don't see why the returns wouldn't be compressed as more participants would come in

CBOE has a few common Option Strategies that you can download and look at past results

http://www.elitetrader.com/et/index.php?threads/new-cboe-benchmark-indicies.293277/