Small Gains, Big Losses: The Hidden Risk in Steady Income

In this episode, we explore why the income we earn isn't the same as the return. We show how option income strategies work, what their historical returns have been, what drives the return, and what reasonable return expectations are.We show why option income strategies have a positive expected return while sports betting has a negative expected return.Finally, we look at other areas where we confuse income with the total return.SponsorsMoney for the Rest of Us Retirement Investing CohortDelete Me – Use code David20 to get 20% offOur Premium ProductsAsset CampMoney for the Rest of Us PlusShow NotesEpisode slide deckVariance Risk Premia by Peter Carr and Liuren Wu—NYUCross section of option returns and idiosyncratic stock volatility by Jie Cao and Bing Han—The Journal of Financial EconomicsThe Price of Correlation Risk: Evidence from Equity Options by Joost Driessen, Pascal J. Maenhout, Grigory Vilkov—SSRNCross-section of option returns and volatility by Amit Goyal and Alessio Saretto—The Journal of Financial EconomicsThe Art of Put Selling: A 10 Year Study by John Marshall, Krag Gregory, Katherine Fogertey—Goldman SachsLow Stress BetsRelated Episodes557: Don’t Fall in the Dividend Trap549: Why Catastrophe Bonds Are Yielding 12%, and Should You Invest?544: Sports Betting Is Not InvestingArticle: Tail Events and Tail RiskSee Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Show: Money For the Rest of Us

Hosts: J. David Stein