The Isenberg School of Management's Center for International Securities and Derivatives Markets at the University of Massachusetts, Amherst, will soon release a study on a protective options collar strategy for the Nasdaq-100 exchange-traded fund.
The QQQ ETF, a security familiarly called the Cube, tracks the tech-heavy Nasdaq index and is widely held by portfolios. The strategy, based on the analysis of data for the QQQ ETF from 1999 to 2008, involves holding six-month puts on QQQ options and consecutive one-month calls for the same contract for an equivalent period.
A protective collar strategy using a six-month put purchase and consecutive one-month call provided far superior returns compared with buying and holding an ETF on the Nasdaq-100 index with about one-third of the index volatility, said finance professor Hossein Kazemi, who co-authored the study with professor Edward Szado.
The collar's performance was analyzed over periods involving both bull and bear markets.
Collaring the Cube: Protection Options for a QQQ ETF Portfolio, is scheduled to be released next month, possibly at the Options Industry annual conference May 1-4 in Las Vegas.Isabelle Clary