Goldman Sees Overwriting Options as Way to Beat Vapid S&P 500

Interest in an options strategy that involves selling bullish calls while holding the underlying stock to generate income has increased substantially over the past six months as slowing economic growth shakes investors’ faith in U.S. equities, according to Goldman Sachs.

Overwriting, as the strategy is called, has historically outperformed the buy-and-hold approach when stocks trade within narrow price ranges or decline, according to Goldman derivatives strategists including Vishal Vivek. Their research found that selling one-month, 10 percent out-of-the-money covered calls on S&P 500 Index stocks has led to an annual outperformance of 1.4 percent on average over the last 16 years.