Return Determinants of Option Strategies: Evidence from Protective Put and Covered Call

This study compares the performance of protective put and covered call strategies and analyzes their return determinants. The analysis uses SET50 Index Options contracts with trading volume, covering maturities from January 2021 to December 2025. The empirical model investigates three groups of explanatory variables: market expectation variables (implied volatility and basis), option market condition variables (open interest and trading volume), and option-specific characteristics (time to maturity and moneyness). The model also incorporates fixed effects for different maturity years (with 2025 as the base year) and quarterly maturity dummies. Standard errors are clustered by monthly expiration groups, and statistical significance is further validated using the wild cluster bootstrap method to improve the reliability of p-values. Overall, the findings indicate that the covered call strategy outperforms the protective put strategy over the sample period, except in 2025. Option strategy performance is primarily driven by market expectation variables rather than contract-specific characteristics. Implied volatility and the basis are the most important determinants of returns for both protective put and covered call strategies, while option market condition variables are relevant mainly for covered call strategies. These results highlight the importance of market conditions in shaping hedging strategy outcomes in the Thai options market.