How Options impact Fund Returns

27th April 2022 - 2pm BST

Speaker: David Buckle

In this presentation, David derives closed-form formulae for the standard portfolio performance measures – risk-premium, risk, Sharpe ratio, and beta – applicable to portfolios containing any combination of options. He provides the mathematics necessary to assess the impact of including of options positions on portfolio efficiency and to account for this impact in rebalancing decisions. The mathematics are illustrated using a number of common option overlay strategies. The analysis reveals that while options introduce asymmetric, non-normal outcomes in the short-run, the repeated use of options overlays over multiple time periods results long-run portfolio returns being normally distributed. Investors need to carefully assess whether option overlay strategies deliver the long-run outcomes desired.

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Please see below David’s bio along with his paper.  

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