The Best Stock Hedging Among Option Strategies

Not much research copes derivatives issues, especially option trading. Meanwhile, practitioners need the empirical result of the robustness of derivatives to optimize the portfolio. There are three stock hedge strategy that commonly used by fund manager in their option portfolio. However, none research has discussed about which stock hedge is the best option strategy. This study aims to examine the best stock hedging strategy among option trading strategy. We employed ANOVA and independent samples t-test to test the stock option portfolio in Dow Jones Industrial Average during 2004 up to 2008. We found that covered call strategy as the best strategy as it can gain highest returns among the option strategy with mediocre risk level. Meanwhile, for passive investing, Collar strategy will be suitable.