Great in practice, not in theory: An empirical examination of covered call writing

Abstract

We examine the empirical performance of an investment strategy that uses covered call writing to enhance the income from long positions in 27 stocks that are included in the FT-SE 100 Index. Using data for the period January 1994–December 1999 we show that, contrary to theory, in most instances covered call positions generate returns that exceed returns generated by buy-and-hold strategies.