Covered Calls Indices in Crude Oil Markets

In this paper, we formulate the mechanics of a potential S&P GSCI® Crude Oil Covered Call Index and explore the impact of writing covered call strategies across a range of strikes and market environments. Our findings suggest that covered calls are able to reduce volatility and drawdown of a pure S&P GSCI Crude Oil position in a variety of market environments. Covered call strategies outperform a pure S&P GSCI Crude Oil position over a market cycle of the last five years. They outperform in periods of flat to down markets, but may underperform in time periods when crude oil prices experience sharp upward moves.