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Overwriting: adding alpha across Asia

- Overwriting has boosted returns on every Asia index since 2008 "A systematic strategy of selling monthly 1-mo 105% index calls has boosted returns across equity indices in Asia over the past two years. When coupled with a simple momentum filter determining whether or not to overwrite, returns have improved even further. The outperformance has been particularly significant on HSI, where systematic overwriters have outperformed long-only by 960bp annually since Jan 1, 2008."
- Slower-paced upside environment conducive to overwriting "While we remain positive on markets, we do not anticipate the explosive valuation upside that was experienced in 2005-07 and 2009. Instead, we believe markets will rise as earnings appreciate, which we expect to be a lower volatility, more gradual move higher and conducive to buy-writes."
- We screen for buy-writes: China Telecom, KB Financial, Canon "The additional returns from overwriting have turned many negative performing stocks into positive performers. On AEJ telcos, consumer, and utilities, for example, overwriters have outperformed by over 30pp since 2008. We screen for opportunities and find China Telecom, Canon, and KB Financial attractive buy-writes."



GoldmanSachs Asia Options Research 20100903

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