Analysis of the Covered Call Options Strategy

The thesis focuses on back-testing an options strategy that could serve as an alternative to investments in exchange-traded funds (ETFs). The strategy is based on purchasing underlying assets in the form of stocks comprising the Dow Jones Industrial Average (DJIA) index between 2021 and 2023, combined with regularly writing out-of-the-money options on the individual stock components on a monthly basis. The strategy is tested in two main variants: the static strategy determines the strike price distance from the spot price in advance—specifically at 5%, 10%, and 15%. The dynamic variant flexibly adjusts the strike price distance based on a comparison of implied volatility and volatility estimated using the GARCH(1,1) model, allowing the strategy to adapt to current market conditions. The thesis analyzes the performance of both approaches and identifies key success factors and their impact on the long-term sustainability of the strategy. The outcome is an evaluation of whether, and under what conditions, this strategy can be an effective alternative to passive investing through ETFs.