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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Andrew Kumiega & Greg Sterijevski & Eric Wills, 2024. "Black–Scholes 50 Years Later: Has the Outperformance of Passive Option Strategies Finally Faded?," IJFS, MDPI, vol. 12(4), pages 1-17, November.
    • Handle: RePEc:gam:jijfss:v:12:y:2024:i:4:p:114-:d:1525125
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