A buy-write strategy buys a diversified portfolio of US large cap stocks, which seeks to provide investors with broad equity exposure. It then sells potential future upside by writing (also known as selling) call options seeking to generate additional returns today.
Historically, this strategy has trailed the S&P 500 in double-digit return markets, but has outperformed in lower return or negative markets.
Source: Bloomberg and GSAM as of August 31, 2017. Negative Return Market is defined as returns less than 0, Flat to Single-Digit Market is defined as returns from 0–9.99% and Exuberant Return Market is defined as returns greater than 10%. As of August 31, 2017, the S&P 500 Index average annual returns for the 1-, 5- and 10-year period were 17.16%, 13.30% and 7.51%, respectively. Buy-Write strategies are represented by the CBOE S&P 500 2% OTM BuyWrite Index. As of August 31, 2017, the CBOE S&P 500 2% OTM BuyWrite Index average annual returns for the 1-, 5- and 10-year period were 15.14%, 8.90% and 6.45%, respectively. Analysis from April 2006 to August 2017, the common inception date of both the S&P 500 Total Return Index and the CBOE S&P 500 2% OTM BuyWrite Index. Frequency of outperformance is calculated by comparing the number of times the CBOE S&P 500 2% OTM BuyWrite Index outperformed the S&P 500 Total Return Index on a 12 month rolling return basis. A Buy-Write strategy refers to an investment that receives call premiums on an underlying equity position seeking to generate income. The CBOE S&P 500 2% OTM BuyWrite Index’s performance is not necessarily reflective of all Buy-Write strategies. The CBOE S&P 500 2% OTM BuyWrite Index is a benchmark index designed to track the performance of a hypothetical Buy-Write strategy on the S&P 500 Total Return Index. Past performance does not guarantee future results, which may vary. There is no guarantee that these objectives will be met.
The march toward full employment and higher inflation may not mean greater investment returns.