Standard option pricing models in finance, like the Black-Scholes model, would suggest that call returns are positive, and that call returns should be higher, the higher the strike of the option.

However, research suggests that this is not necessarily the case, at least when it comes to index options, such as with the S&P 500 as underlying. When an out-of-the-money call goes in the money, this is, on average, accompanied by an increase in market volatility, which investors may not like - Tobias Sichert In their research, Returns of claims on the upside and the viability of U-shaped pricing kernels , published in the Journal of Financial Economics (2010), Bakshi, G., D. Madan, and

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