3433-vol. 6 issue 2-3.pmd - iarfc
3433-vol. 6 issue 2-3.pmd - iarfc
3433-vol. 6 issue 2-3.pmd - iarfc
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120<br />
Journal of Personal Finance<br />
Table 3<br />
Bull Call Spread vs. Stock Investment: Monthly Return<br />
January 1993 – December 1999<br />
Bull Call Spread a Stock Investment<br />
Dow Jones Average Standard Sharpe Average Standard Sharpe<br />
Companies Return Deviation b Ratio Return Deviation Ratio<br />
Alcoa -23.69% 22.13% -1.09 2.09% 8.39% 0.20<br />
AIG -25.37% 33.04% -0.78 2.33% 6.74% 0.29<br />
Altria Group -20.45% 32.96% -0.63 0.25% 8.48% -0.02<br />
AT&T -17.81% 62.52% -0.29 0.78% 7.95% 0.05<br />
Boeing -15.87% 33.88% -0.47 1.48% 9.13% 0.12<br />
Citigroup -20.50% 48.23% -0.43 3.15% 9.05% 0.31<br />
Caterpillar -23.20% 25.48% -0.93 0.55% 11.35% 0.02<br />
Coca-Cola -14.55% 27.33% -0.55 1.58% 6.81% 0.18<br />
DuPont -15.98% 29.51% -0.55 1.45% 7.03% 0.15<br />
Disney -18.51% 32.95% -0.57 1.24% 7.83% 0.11<br />
Eastman Kodak -18.19% 57.19% -0.32 0.53% 7.30% 0.02<br />
Exxon Mobil -10.72% 38.32% -0.29 1.34% 4.51% 0.21<br />
General Electric -15.09% 27.46% -0.56 2.47% 5.77% 0.36<br />
General Motors -9.91% 37.98% -0.27 1.39% 8.14% 0.12<br />
Hewlett-Packard -19.26% 23.65% -0.83 2.58% 8.90% 0.25<br />
Home Depot -20.15% 30.72% -0.67 2.33% 7.78% 0.25<br />
Honeywell -19.98% 35.73% -0.57 1.74% 6.76% 0.20<br />
IBM -10.68% 25.46% -0.43 3.40% 9.48% 0.32<br />
Intel -26.87% 26.56% -1.03 2.83% 12.05% 0.20<br />
Johnson & Johnson -17.32% 25.92% -0.68 1.79% 6.12% 0.23<br />
McDonald’s -17.70% 23.24% -0.78 1.69% 6.29% 0.21<br />
Merck -12.63% 36.45% -0.36 1.75% 7.24% 0.19<br />
Microsoft -17.36% 32.37% -0.55 4.20% 7.26% 0.53<br />
MMM -20.97% 22.34% -0.96 0.97% 6.50% 0.09<br />
Pfizer -23.42% 26.59% -0.90 2.56% 8.11% 0.27<br />
Procter & Gamble -20.48% 27.49% -0.76 1.85% 6.06% 0.24<br />
Verizon -19.09% 26.47% -0.74 1.18% 5.99% 0.13<br />
Wal-Mart -20.77% 29.67% -0.71 2.03% 8.18% 0.20<br />
a<br />
This spread in<strong>vol</strong>ves buying one contract of the call option that has the<br />
strike price right below the stock price, and selling one contract of the call<br />
option that has the strike price right above the stock price.<br />
b<br />
The Sharpe ratio is computed by dividing the mean return on the spread less<br />
the mean return on Treasury bills by the standard deviation of return on the<br />
spread.<br />
©2008, IARFC All rights of reproduction in any form reserved.
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