Over the past year or so, "buy-write" beat "buy-and-hold" by ~15%: http://finance.yahoo.com/q?s=^BXM&d=c&k=c1&c=^gspc&a=v&p=m50,m200,s&t=1y&l=on&z=m&q=l Easy money, huh? Now that the secret is out, all you need to do is start a hedge fund, beat SP500 by 15%, collect 20% of the profits, and relocate to Bahamas... Right?
Well, 20% of 15% is 3% overall, not accounting for inflation. Also, the S&P was down, so, you would only be less negative, depending upon from where you measure. Not exactly burning up the market... P.S. You linked to the 3-mth chart.
If earning 3% on other people's money by executing one or two transactions a month is not enough, one could double this by writing straddles... How many money managers have consistently beaten SP500 by 30%/year over the past decade?
When comparing the returns of a stock portfolio with the returns or a stock-and-options portfolio, you should probably not look at the absolute returns, but the risk-adjusted returns. Obviously with derivatives or leverage involved, you'd expect a higher return, but how much higher is the question.
No leverage is involved here. In fact, a new "buy-write" position is only half as volatile (read: leveraged) as a "buy-and-hold" one.