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Risk-Return Dynamics Using Leveraged ETF Options

This study uses barbell strategies on the S&P 500 and the NASDAQ 100 to explore if funds invested primarily in fixed income assets with a portion of the investment placed in in-the-money call options can participate in upside potential, while also reducing risk. This study examines call options on the underlying indexes as well as their leveraged, 2x and 3x, counterparts. The barbell strategy studied, 88% in fixed income bonds and 12% in call options, does not have a higher return than the underlying index, and adds additional risk. However, a weighted portfolio with combinations of a risk-free asset and leveraged ETF does provide a higher return on investment, with a decreased risk as compared to the underlying index.

Identiferoai:union.ndltd.org:ETSU/oai:dc.etsu.edu:honors-1892
Date01 May 2022
CreatorsWampler, Eliza
PublisherDigital Commons @ East Tennessee State University
Source SetsEast Tennessee State University
Detected LanguageEnglish
Typetext
Formatapplication/pdf
SourceUndergraduate Honors Theses
RightsCopyright by the authors., http://creativecommons.org/licenses/by-nc-nd/3.0/

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