1) It may not be impossible to check out this system on paper, but that hasn't stopped almost every academic or paper study of the problem from being misleading if not worthless. Paper studies of options are notorious for their very "paperness," much more so than bowl games. Not only are there more execution complications, but there are more people doing studies!


2) I am very touchy about the idea that, by "curve-fitting" a strategy - finding a set of inputs which would have yielded a theoretical profit in the past (and choosing from a sufficiently large pool of candidate inputs that such a strategy will certainly be found) - suggests anything about the price of options, or about the future profitability of the strategy, or even answers your question!


So, if you want the simple answer to your question, yes, in the early 90's I did your study using 12 years of Wall Street Journals which I bought from a guy in Hayward CA, so that I could figure in news stories to see if they helped advertise the jackpot illusion. I had recently finished writing a "complex expectations" options-pricing program for Windows and, to my surprise, it seemed to suggest that most options were over-priced! So I was curious was it garbage-in-garbage-out, or could I make a profit, so I did the study.


The study confirmed that a study will often show that calls are over-priced. And what I'm telling you is that anybody who answers your question is silly!


But I'm also taking it a step further. The correct thing to study is not the behavior of options prices, but the behavior of people who perform studies, and who in turn create options prices with their transactions!


There have been many academics who came to Wall Street armed with studies. Milken used Braddock Hickman's "Corporate Bond Quality and Investor Experience, 1900-1950" - as a sales tool if nothing else - and made a fortune. David Askin used his own studies of experience with difficult-to-price mortage-backed securities and got killed.


I guess the bottom line is that the stock market is an out-of-control knowledge-production machine. Charts are like Rorschach charts, you can see in them whatever you want, and then write the word KNOW in capital letters.


And I can't stand to watch people learn nonsense!


It irritates me if someone writes an article in a newspaper advising investors to always use limit orders, or someone writes a post saying you can make money selling calls, or if someone says you can buy and hold stocks and you will make money!


In reality, stock-market knowledge is generally wrong as soon as it is produced. So if I simply say, "look what people have learned to do and do the opposite" I will also be misleading. The question is, how fast do people evolve to do one thing and, once they have, how long will they continue losing money before the opportunity vanishes?


leroy