The merits of covered calls

TECHNICAL

Cristiano Migliorini, senior research analyst at UBP Asset Management, examines how call overlays can improve risk-adjusted returns in all market conditions and the ingredients the best strategies should share.

Equity markets rallied strongly earlier this year, taking many investors by surprise after the heightened risk aversion of much of last year. Indeed, global equities returned more in the first quarter than they rise in an average year. What changed in the global macroeconomic backdrop to lead to this improvement in investor sentiment? Not much, in our view.  While the outlook for US economic growth had improved, the encouraging data we saw was backed up by positive seasonality – but quarter two is not looking as good. Meanwhile, questions remain about the Chinese economy, and the euro...