FIN 4340.s19

Group Project

option strategies delta-neutral straddles and strangles using the S&P 500 (SPX) historical options data. The trading strategies should be implemented at monthly frequency.

Compute the return series for each option strategy. The returns are defined as the following:

Annualized Holding Period Return = (Payoff at maturity/Initial Cost - 1)*12/holding period

For one-month options, compute returns every month. For two- or three-month options, compute returns every two or three months.

Compute average returns for each year and produce a comparison plot of historical annual returns.

Analyze the relative performance of the option strategies and explain why some strategies perform better than others and why a certain strategy performs better in some years than other years.

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