Today Mr. Brad Johnson, CFA, Investment Consultant, Cambridge Associates, LLC, delivered a presentation at the CBOE’s 28th Annual Risk Management Conference.
Cambridge Associates is a privately held independent consulting firm that provides consulting and investment oversight services to more than 900 clients worldwide.
Mr. Johnson presented a paper entitled “Highlights from the Benefits of Selling Volatility” (which is available at www.cboe.com/benchmarks) which noted in part —
Over the past 20 years, a strategy of systematically selling out of the money puts and calls on the S&P 500 Index (a short strangle portfolio) would not only have soundly beaten equity returns with lower volatility, but also offered similar returns to the median hedge fund manager tracked by Cambridge Associates. Such a strategy would also have offered significantly better transparency and liquidity than most hedge funds.