Today Tom and Tony discuss the performance of a diversified portfolio of long stocks and bonds against a portfolio of short puts in SPY and TLT.
How does a diversified portfolio of stocks and bonds perform against a portfolio of short puts in SPY and TLT?Study
- SPY and TLT, Short 50 delta put
- 2005 - 2018, closest to 45 DTE
- $1 Million account
- 100% Buy-and-hold SPY + TLT underlyings (50/50)
- Short 50 delta puts in both SPY and TLT by allocating 25% (50/50) of the available account value i.e. 12.5% into SPY and 12.5% into TLT
We find that the long stock portfolio and the short put portfolio perform about the same P/L wise, but the options portfolio is a lot less volatile and requires much less capital.