New Paper: Strong Risk-adjusted Returns for BXM, BXY and PUT Indexes, while Tail Risk Was Mitigated by CLL Index

This week the Asset Consulting Group published a new six-page paper “An Analysis of Index Option Writing for Liquid Enhanced Risk-Adjusted Returns” (available at

Key findings of the paper include:


  • Total Growth. Total growth for indexes since mid-1986 was 1153% for PUT Index, 830%  for BXM Index, 807% for S&P 500® Index, and 368% for CLL Index (Exhibits 2 and 6).
  • Lower Volatility. The PUT, BXM, and CLL indices all had volatility that was about 30 percent lower than the volatility of the S&P 500 Index (Exhibit 4).
  • Left-tail Risk. Over the past 25 years, the worst monthly loss for the S&P 500 Index was a decline of 21.5 percent, compared to a relatively modest 8.6-percent monthly decline for the CLL Index (Exhibit 8e).
  • Risk-adjusted Returns. One measure of risk-adjusted returns, the Sortino Ratio, was 0.90 for the PUT Index, 0.75 for BXY, 0.71 for BXM, 0.50 for S&P 500, and 0.31 for CLL Index (Exhibits 10 and 11).  Please note that all the indexes had negative skewness.
  • Monthly Premium Income. The average for the gross monthly premiums collected by the BXM Index was 1.8 percent, and the index options usually were richly priced (Exhibits 12 and 13).

In Exhibit 5 of the paper, the PUT, BXM and BXY indexes all are to the northwest of three stock indexes and a commodity index, with higher returns and less volatility over a period of more than 23 years.

Gross premiums for the BXM Index averaged around 1.8 percent per month (Exhibit 12).

Average daily volume for S&P 500 (SPX) options rose form 87,286 in 2000 to 783,768 in 2011. The estimated value of notional trading of SPX options has risen to around $40 billion per day (Exhibit 14).


Links to several papers are at