I’m excited to unveil a study Mark Phillips and I have been working on since late 2024. We presented it on an X livestream on Thursday:

The video is 90 minutes and loaded not just with results but education.

We break down:

  • Why covered calls are more than just “income” strategies 📉
  • How volatility and path dependency impact performance 📊
  • The nuances of delta hedging and risk normalization ⚖️
  • How indicators like IV, VRP, and skew perform vs a naive strategy ✅
  • The tradeoffs between indicator accuracy and sample size 🚀

Whether you’re new to options or managing advanced strategies, this deep dive will sharpen your understanding of volatility P&L, trading mechanics, and how even simple strategies have complex outcomes.

🎯 Key Takeaways

  • Covered calls = long delta, short vol
  • Separate volatility P&L from directional P&L to assess strategy mechanics
  • Option backtests involve many design choices—beware of hidden assumptions
  • Writing calls on single names vs indexes brings ironic tradeoffs
  • Volatility pricing is often efficient, especially in liquid names
  • Most 1-month option P&L comes from realized vol, not just theta decay

Written recap

✍🏽Mark did a wrote up a recap including our tables: Dialing in on TSLA covered calls

editor

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