TY - JOUR T1 - Can Individual Investors Use Option Strategies and<br/>the Tax Code to Their Advantage? JF - The Journal of Wealth Management SP - 47 LP - 52 DO - 10.3905/jwm.2017.20.1.047 VL - 20 IS - 1 AU - Bryan Foltice Y1 - 2017/04/30 UR - https://pm-research.com/content/20/1/47.abstract N2 - This article tests whether high-income earners can earn excess risk-adjusted returns by annually exploiting the asymmetric U.S. tax treatment of long-term capital gains and losses using at-the-money (ATM) options. In this article, we run an initial analysis that tests the returns of the previous 50 years, from 1966 through 2015, that buys $3,000 of one-year ATM call options on the S&amp;P 500 (SPY) to determine excess risk-adjusted returns for individuals of various taxable income levels. Additionally, we run a Monte Carlo simulation, based on long-term historical returns, standard deviations, and correlations, to test the robustness of the initial results for a risk-neutral investor. We find that call options can provide increased annual performance returns for all income levels. Furthermore, we conclude that these strategies also provide excess risk-adjusted returns for high-income earners in the 28% and higher income tax brackets.TOPICS: Wealth management, legal/regulatory/public policy, simulations, performance measurement ER -