7. Conclusion
This study shows the BXM Index, a benchmark for an S&P 500-based covered call strategy,
had slightly higher returns and significantly less volatility than the S&P 500 over a time period
of almost 16 years, despite the fact that covered calls have a truncated upside in the short term.
The CBOE BXM Index is found to have been an effective substitute for large-cap investment
that improved the risk-adjusted performance of standard investment portfolios, and that it is
reasonable to conclude that investable versions would have substantially replicated the
performance of the index. It is also determined that the BXM strategy would still have been a
very desirable investment when its return was reduced by 100 basis points. Further, several
fundamental considerations have been identified that might explain the relative performance of
the BXM strategy. These conclusions, together with the likelihood that any changes in the
relative performance of the BXM will evolve slowly over time, lead to the assessment that the
BXM strategy is a prudent investment option worthy of investor attention.
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