Mutual Funds That Use Options

The Institute For Global Asset And Risk Management (INGARM) released a new study today called Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs. Two PhDs, Keith Black and Edward Szado, studied 119 mutual funds that use options and analyzed their risk-adjusted performance. Some have used options since 1988.

Growth In Number Of Mutual Funds That Use Options

The number of Options-Based Funds grew from 10 in 2000 to 119 in 2014:

growth in mutual funds that use options

Key Findings For Options-Based Funds

The study performed an analysis of the equal-weighted performance of 80 Options-Based Funds that focus on use of U.S. stock index options and/or equity options during the 15-year period from 2000 through 2014, and had two key findings:

(1) Higher risk-adjusted returns. The Options-Based Funds had similar returns as the S&P 500 Index with lower volatility and lower maximum drawdowns. Said another way, the Options-Based Funds had higher risk-adjusted returns, as measured by the Sharpe Ratio, Sortino Ratio, and Stutzer Index. In addition, using the S&P 500 as a base, the Options-Based Funds and the CBOE BuyWrite Index BXM had better risk-adjusted returns using 3 measures:

risk adjusted returns for options-based mutual funds

(2) Strong performance for benchmarks that use SPX index options. From mid-1988 to the end of 2014, the CBOE S&P 500 2% OTM BuyWrite Index had higher returns and lower volatility than the S&P 500 Index. Here are the standard deviations, where a smaller number is better (less volatility):

options-based mutual funds volatility

Download The Study

To see more data, download the 30-page study as a PDF file: Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs.

List Of Closed End Funds (CEFs) That Use Options

AllianzGI NFJ Dividend Interest & Premium CommonNFJ
BlackRock Enhanced Capital & Income CommonCII
BlackRock Enhanced Equity Dividend CommonBDJ
Columbia Seligman Premium TechnologySTK
Eaton Vance Enhanced Equity Income CommonEOI
Eaton Vance Enhanced Equity Income II CommonEOS
Eaton Vance Risk-Managed Diversified Equity Income CommonETJ
Eaton Vance Tax-Managed Buy-Write Income CommonETB
Eaton Vance Tax-Managed Buy-Write Opportunities CommonETV
Eaton Vance Tax-Managed Dividend Equity Income CommonETY
First Trust Enhanced Equity Income CommonFFA
Guggenheim Enhanced Equity Income CommonGPM
Guggenheim Enhanced Equity Strategy CommonGGE
Guggenheim EW Enhanced Equity CommonGEQ
Madison Covered Call & Equity StrategyMCN
Madison Strategic Sector Premium CommonMSP
Nuveen Core Equity Alpha CommonJCE
Nuveen Dow 30 Dynamic OverwriteDIAX
Nuveen NASDAQ 100 Dynamic OverwriteQQQX
Nuveen S&P 500 Buy-Write IncomeBXMX
Nuveen S&P 500 Dynamic OverwriteSPXX
Nuveen Tax-Advantaged Dividend Growth CommonJTD

List Of Exchange Traded Funds (ETFs) That Use Options

First Trust High Income ETFFTHI
First Trust Low Beta Income ETFFTLB
Horizons S&P 500 Covered Call ETFHSPX
Horizons US Equity Managed Risk ETFHUS.U
PowerShares S&P 500 Buy-Write ETFPBP
Recon Capital NASDAQ 100 Covered Call ETFQYLD
US Equity High Volatility Put Write ETFHVPW

List Of Mutual Funds That Use Options

Mutual Fund
Alliance Bernstein/TWM Global Equity & Covered Call Strategy FundTWMLX
AllianzGI Structured Return A-ClassAZIAX
AllianzGI US Equity-Hedged - InstitutionalAZUIX
AMG FQ US Equity - InstitutionalMEQFX
Arin Large Cap Theta - InstitutionalAVOLX
ASTON/Anchor Capital Enhanced Equity - InstitutionalAMDSX
BPV Low VolatilityBPVLX
BPV Wealth Preservation AdvisorBPAPX
Bridgeway Managed VolatilityBRBPX
Camelot Excalibur Small Cap Income - Class ACEXAX
Camelot Premium Return - Class ACPRFX
Catalyst/Lyons Hedged Premium Return - ACLPAX
Catalyst/MAP Global Capital Appreciation - ACAXAX
Catalyst/SMH Total Return Income - Class ATRIFX
Centaur Total ReturnTILDX
Covered Bridge - Class ATCBAX
Credit Suisse Volaris US Strategies - Class AVAEAX
Crow Point Defined Risk Global Equity Income - Class ACGHAX
Dividend Plus Income Fund - InstitutionalMAIPX
Dunham Monthly Distribution Fund - Class ADAMDX
Eaton Vance Hedged Stock - InstitutionalEROIX
Frost Cinque Large Cap Buy-Write Equity - AFCAWX
Gateway - Class AGATEX
Gateway Equity Call Premium - Class AGCPAX
Glenmede Secured OptionsGTSOX
GMO Risk Premium - Class IIIGMRPX
Hatteras Disciplined Opportunity - InstitutionalHDOIX
Hussman Strategic GrowthHSGFX
ICON Risk-Managed Balanced - Class AIOCAX
Investment Partners Opportunities - Class AIPOFX
Iron Horse - Class AIRHAX
Ironclad Managed RiskIRONX
JHancock Redwood - Class AJTRAX
KF Griffin Blue Chip Covered Call - Class AKFGAX
Kinetics Multi-Disciplinary Advisor - Class AKMDAX
Leigh Baldwin Total ReturnLEBOX
LS Theta - InstitutionalLQTIX
Madison Covered Call & Equity Income - Class AMENAX
MD Sass Equity Income Plus Fund - InstitutionalMDEIX
RiverNorth Managed Volatility - Class RRNBWX
RiverPark Structural Alpha - InstitutionalRSAIX
RiverPark/Gargoyle Hedged Value - InstitutionalRGHIX
Russell Strategic Call Overwriting - Class SROWSX
Schooner - Class ASCNAX
Swan Defined Risk - Class ISDRIX
Touchstone Dynamic Equity - Class YTDEYX
Virtus Low Volatility Equity - Class AVLVAX
WP Large Cap Income Plus - InstitutionalWPLCX

Mike Scanlin is the founder of Born To Sell and has been writing covered calls for a long time.