selling options...better than buy & hold?

It's easy to cherry-pick performance & make any strategy look good.  But with option selling, performance comparisons are very objective.  In chapter 25 of my primer Selling Options...Simply Called and Simply Put (noted on this page), I review 5 outcomes for an option's underlying stock & compare them to selling options versus the underlying stock.  The 5 outcomes are through-the-roof, up modestly, flat, down modestly & into-the-tank. 

In response to my one year old post of 10/21/18, "Flexibility, creativity...," another Dave asked me on 10/24/19 how my option selling versus TLT (the I*Shares ETF that holds long term Treasurys) worked when TLT shot up dramatically in the first half of 2019.  I had piqued his interest in my year old post of 10/21/18, when I reviewed a 24 day period in which I could have done nothing (similar to buy & hold) with my existing, sold, TLT covered call; & compared doing nothing versus the TLT covered call repair that I actually made.  During this 24 day period, the 10 year US Treasury yield rose from 3.10% to 3.20% & TLT dropped nearly $3 a share.  Had I done nothing, my strategy would have gone into-the-tank, losing 2.21% over the 24 days, or 33.54% annualized.  But by repairing my covered call & generating a premium credit, my option selling strategy still got beat up, but not as much - it dropped 1.59% over 24 days, or 24.14% annualized.  The covered call repair that I made provided a modest hedge against rising interest rates & falling bond prices.

To answer "another Dave's" query, I could only review the 3 month period ending on 3/15/19.  During this 3 month period, the 10 year US treasury yield dropped from 2.79% to 2.59% & TLT appreciated.  I compared TLT option selling versus FNBGX, the Fidelity index fund that's a good proxy for TLT because both invest in long term US Treasurys.  During this 3 month period, FNBGX went up modestly, 1.34% or 5.36% annualized.  Selling options against TLT fared better, up 2.73% or 10.93% annualized. 

By the way, the 10 year US Treasury yields only 1.80% today; TLT has gone through-the-roof since 3/15/19.  It's reasonable to say that if I had been selling TLT options since 3/15/19, my strategy would have done well, but hardly as well as buying & holding TLT. 

Option selling, in general, should beat 4 of the 5 outcomes above, losing only to through-the-roof.  But it doesn't prevent an investor from losing money!