Two strategies can start from the same index, sell options on that same index, and still arrive at widely divergent results. This is precisely what emerges when comparing an active call spread strategy on the S&P 500 against the Cboe S&P 500 BuyWrite Index, the benchmark for traditional covered calls.
From August 30, 2022, to July 31, 2026, the active call spread strategy on the S&P 500 accumulated a 70.92% return. Over the same period, the Cboe S&P 500 BuyWrite Index accumulated 55.44%. In annualized terms, the difference was also relevant: 14.65% versus 11.91%.
The core point is that the underlying index, the option asset class, and the timeframe analyzed are identical. The difference lies in how the options selling is executed, resulting in nearly 3 percentage points per year of performance gap between the strategies.
The Dynamics Behind Each Model
In the mechanical covered call model, the strategy sells one-month, slightly out-of-the-money (OTM) calls against 100% of the portfolio’s value and holds these options until expiration. The rule is fixed and applied every month, regardless of market volatility levels.
In the active strategy, the construction differs. The model sells options on less than the total portfolio value, staggers multiple contracts at different distances from the current price—a concept known as moneyness—and uses part of the premium received to buy further OTM calls, forming a net credit spread.
This third point is decisive because it alters the strategy’s behavior in each market scenario. In a sideways environment, both models tend to work well, as the premium received becomes practically the entire return. In downward periods, this premium helps cushion losses.
The difference appears most forcefully in bull markets. In the mechanical model, the return is capped at the strike price sold. Conversely, the net credit spread restores participation above the upper strike price and, in the active model, also allows for buybacks or repositioning throughout the month.
Therefore, the most relevant metric in this comparison is not just absolute return, but return per unit of risk. This relationship is captured by the Sharpe Ratio.
Between September 2022 and January 2025, the strategy exhibited a 0.72 beta against the S&P 500, a standard deviation of 11.19% versus the index’s 15.15%, and a maximum drawdown of -7.78% versus -9.21%. Upside capture stood at 75% and the Sharpe Ratio was 1.67.
In other words, the strategy captured three-quarters of the upside, with one-quarter less volatility, plus monthly cash flow along the way.
Does Income Generation Make Sense for All Investors?
This type of construction makes sense for investors who need monthly cash without selling positions, for those seeking to reduce equity volatility without fully migrating to fixed income, and for those willing to forgo part of the upside in exchange for receiving premiums every month.
On the other hand, this is not the ideal strategy for those wishing to capture 100% of a bull market. In that scenario, the raw index tends to deliver more.
On the B3 exchange, some ETFs carry this logic, each on a different underlying reference asset, such as SPYI11 for the S&P 500, QQQI11 for the Nasdaq-100, and COIN11 for Bitcoin, for example.
Ultimately, the index may be the same. The way the option is sold is what separates the results.
