Harvesting the Variance Risk Premium in Nuclear and Energy Equities: A Short-Put Portfolio Derisking Strategy

Battle Count: 60

Highly relevant to quantitative trading. The paper presents a complete, backtested options strategy (short-put portfolio) with explicit entry/exit rules, risk management (stop-loss, take-profit, cash-secured), and portfolio construction (equal-weight, concentration caps). It addresses VRP harvesting, a well-known anomaly in options markets, applied to a specific sector. The Sharpe ratio of 7.8 (unconditional) and 2.6 (threshold) are directly comparable to quant strategy benchmarks. The strategy is simple enough to implement without complex optimizers, making it accessible for systematic trading desks. However, the nuclear/energy sector focus limits generalizability, and the in-sample nature with survivorship bias tempers practical applicability.

Moderate complexity. The core strategy (sell 0.30-delta, 45-DTE cash-secured puts, exit at 50% decay or 2x loss or 15 DTE) is straightforward. GARCH(1,1) with fixed parameters is simple to implement. The main complexity lies in: (1) sourcing and maintaining daily option data (OptionMetrics/CRSP), (2) computing open-interest-weighted ATM IV for |delta| in [0.40,0.60] and DTE in [15,45], (3) the put selection scoring function, (4) portfolio-level equal-weight aggregation across 39 tickers, and (5) handling the threshold filter for conditional variants. No ML training or complex optimization is required. The paper explicitly states 'no complex optimizer and no sentiment signal' is needed.

The paper specifies GARCH parameters (alpha=0.09, beta=0.90), put selection criteria (0.30 delta, 45 DTE), exit rules, and universe construction in detail. However, data sources (WRDS OptionMetrics, CRSP) require institutional subscriptions. No code or GitHub repository is provided. Some design choices (thresholds, scoring function) are hardcoded without joint optimization. The universe is fixed at today's survivors, introducing look-ahead bias that limits true reproducibility of investable results.