Offer your thoughts or opinion on the input financial query or topic using your financial background.

Comparison between buying a stock and selling a naked put
I sell a put for a strike price at the market. The stock rises $50 over the next couple months. I've gotten the premium, but lost the rest of the potential gain, yet had the downside risk the whole time.  There's no free lunch.  Edit - you can use a BS (Black-Scholes) calculator to create your own back testing. The calculator shows a 1% interest rate, 2% yield, and 15% volatility produce a put price almost identical to the pricing I see for S&P (the SPY ETF, specifically) $205 put. No answer here, including mine, gave any reference to a study. If one exists, it will almost certainly be on an index, not individual stocks. Note that Jack's answer referencing PUTX does exactly that. The SPY ETF and it put options. My suggestion here would, in theory, let you analyze this strategy for individual stock options as well.  For SPY - With SPY at 204.40, this is the Put you'd look at -  12 times the premium is $33.36 or 16% the current price. The next part of the exercise is to see how the monthly ups and downs impact this return. A drop to $201 wipes out that month's premium.  It happens that it now March 18th, and despite a bad start to the year, we are at break-even YTD. A peek back shows In Dec you picked up $2.87 premium, (1.4% the current price then) but in Jan, it closed for a loss of $12. Ouch. Now, if you started in January, you'd have picked up 2 month's premiums and today or Monday sell the 3rd. You'd have 2.8% profit so far, vs the S&P break even.  Last, for now, when selling a naked put, you have to put up margin money. Not sure how much, but I use percent of the value of underlying stock to calculate returns. That choice is debatable, it just keeps percents clean. Else you put up no money and have infinite return.