The Hidden Risks of High Income Options Strategies | Shawn Gibson and Eric McArdle

In this episode of Excess Returns, Justin interviews Shawn Gibson and Eric McArdle from Liquid Strategies about option-based overlay strategies, focusing on yield and protection. They discuss the evolution of options in investor portfolios, highlighting the rise of covered call writing and principal protection strategies. They critique common flaws in option strategies, such as asymmetric return profiles and the "set it and forget it" mentality, advocating for active management and downside protection. The conversation covers the benefits of overlay strategies, the use of put spreads, the importance of timeframe in option selling, and the impact of rates and volatility. They also address high yield strategies and the significance of total return, emphasizing the need for investors to understand the source of income and the potential for overstating yields.