Will this beat the market?

D

dcwriter2

If my only benchmark was to beat the market each year, would it work to limply buy the SP 500 (say a SPY) on Jan. 1 and simultaneously sell a, say 90 day far OTM call, with a delta of -95 or less. Then either ride or repeat. The small theta gain then compounds ...
 
richDude said:
stop day dreaming. there is no free lunch.
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He’s not talking about free lunch. Holding SPY is not a free lunch. Are you capable of answering the question, or you just walk around and repeat something you heard?
 
dcwriter2 said:
If my only benchmark was to beat the market each year, would it work to limply buy the SP 500 (say a SPY) on Jan. 1 and simultaneously sell a, say 90 day far OTM call, with a delta of -95 or less. Then either ride or repeat. The small theta gain then compounds ...
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Either you are confused or fail to review you post before transmitting. No logic in what you posted. Re-Read your post then revise with valid question! -- IE, if you really mean OTM Call, then should your (-95), be (+5)?
 
dcwriter2 said:
If my only benchmark was to beat the market each year, would it work to limply buy the SP 500 (say a SPY) on Jan. 1 and simultaneously sell a, say 90 day far OTM call, with a delta of -95 or less. Then either ride or repeat. The small theta gain then compounds ...
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This is a covered call and yes they can add to your returns...
 
So, a long-term beat-the-market strategy that beats 80 percent of professional money market managers over the long haul. Wonder why more do use it?
 
I think it’s an interesting approach, I mean possibly selling some deep OTM call, but not sure whether you’d add more than 0.003% to SPX gain, basically collecting free $10 per $300K capital. Not of much use except bragging rights of beating S&P 500. Though even then not sure whether it would’ve worked every time in the past.
 
guru said:
He’s not talking about free lunch. Holding SPY is not a free lunch. Are you capable of answering the question, or you just walk around and repeat something you heard?
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he is asking if he can get free alpha to beat the spy by selling a call. And I am saying there is no free lunch aka alpha. Because selling option has no intrinsic edge. You may get away with the premium 9 times and it’s that 1 time where tha market will spike past your strike and cancel all the gains you made in the previous 9 times.

I am capable of answering the question lol just didn’t expect I had to explain this shit in detail lol.
 
Mostly pft vol goes down, the skewness of your PnL distribution will decrease further, and it's going to be pretty much based on sequence of market returns whether you actually make more money. A month like Dec coming in when you're close to expiry is probably going to set you back a loong time before your paltry calls will earn back the losses. The only way you're going to beat the market with this is with a long time horizon and employing some leverage to monetize the slight increase in sharpe. And even then it's going to be marginal at best.
 
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