The Covered Call: Generating Quantitative Yield
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In the world of long-term investing, "Buy and Hold" is the most popular strategy. While it is simple, it is highly inefficient. A passive investor relies entirely on capital appreciation and minor dividends, exposing their portfolio to maximum volatility during market downturns.
To a quantitative analyst, an equity portfolio is not just a collection of stocks; it is collateral. The Covered Call strategy is the academic method of using that collateral to manufacture synthetic dividends, actively lowering the cost basis of the portfolio and mathematically reducing systemic risk.