Abstract
The author shows that, somewhat surprisingly, the real world expected value of an at-the-money call option does not increase when stock index returns are assumed to follow a more realistic process that than of geometric Brownian motion. Thus, the fact that instantaneous stock returns are not normally distributed does not detract from the efficacy of covered call (CC) strategies (relative to the stock index), which employ at-the-money call options. The analysis presented in this article concentrates on the efficacy of stock index CC strategies. The stock index process used by the author incorporates stochastic volatility, jumps in returns, and jumps in volatility. <b>TOPICS:</b>Equity portfolio management, statistical methods, volatility measures
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