Black–Scholes 50 Years Later: Has the Outperformance of Passive Option Strategies Finally Faded?

Andrew Kumiega (), Greg Sterijevski and Eric Wills
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Andrew Kumiega: Stuart School of Business, Illinois Institute of Technology, Chicago, IL 60616, USA
Greg Sterijevski: CommodityVol.com, West Palm Beach, FL 33412, USA
Eric Wills: Park River Advisors, Shorewood, IL 60404, USA

IJFS, 2024, vol. 12, issue 4, 1-17

Abstract: Slightly over fifty years ago, the Black–Scholes option pricing model revolutionized investing by enabling a shift from linear to non-linear payoff structures. Myron Scholes later published two papers documenting the performance of passive option strategies that outperformed the underlying index on a risk–return basis. The options market has evolved considerably over the last fifty years from an open outcry trading structure with options being single-listed to a high-frequency computer-based market. This paper re-evaluates the trilogy of foundational studies to determine whether passive-option-enhanced portfolios still produce superior performance in the current high-frequency options market environment.

Keywords: equity options; option-enhanced indices/portfolios; option strategies; reward-to-risk portfolio performance (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2024
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