Market Measures

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Diversified Portfolio Performance

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

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
  • Compare:
    • 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
Results

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.

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