This paper investigates the performance of option investments across different stocks by computing monthly returns on at-the-money straddles on individual equities. It finds that options with high historical returns continue to significantly outperform options with low historical returns over...

We show that the average difference between the implied volatilities of call and put options on individual equities, which we term the implied volatility spread (IVS), has strong predictive power for stock market returns at horizons between one and six months, with monthly in-sample and...

This paper develops a new method to calculate hedged returns on model-free “equity VIX” option portfolios. Our returns are highly correlated with realized variance minus implied variance. Compared to CBOE’s VIX formula, our formulas are more accurate for both simulated and actual prices,...