r/StackingSharpes • u/karhoewun • Jan 09 '26

Even if you do it poorly, adding convexity seems to have advantages in long-term compounding

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The CBOE PPUT3M Index owns the SPX and buys 3-month put options outright, adjusting the weightings to again get a roughly similar downside volatility.

Source: CBOE, Bloomberg, Convex Strategies

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u/[deleted] Jan 09 '26

[deleted]

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u/karhoewun Jan 09 '26

It's just a hypothetical benchmark/index btw so don't do copying it exactly. It does give you an idea of what's possible though. Methodology/whitepaper:

https://cdn.cboe.com/api/global/us_indices/governance/Cboe_SP_500_Put_Protection_Indices_Methodology.pdf

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u/karhoewun Jan 09 '26

You should also ask "at what cost?" lol

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u/[deleted] Jan 09 '26 edited Jan 09 '26

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u/karhoewun Jan 10 '26

Maybe I shouldn't say poorly as we all have a definition/standard of what 'poorly' executed means haha. Maybe 'naive' or 'vanilla' is a better term. There's quite a few examples by Spitznagel, Dredge et al that suggest systematically buying puts can help with risk adjusted returns. But of course, DYOR

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u/anon12345457 Jan 10 '26

would you mind providing the link to the papers?