News Stories Indicate Interest in Prudent Use of Options as 2012 RMC is Set To Launch

CBOE’s 28th Annual Risk Management Conference (RMC) launches this Sunday as there have been a number of news stories over the past few months regarding prudent use of options for risk management and income.

Below are some sample headlines and excerpts —

How to Hit Profitable Singles


February 11, 2012

By Steven M. Sears

… The Chicago Board Options Exchange’s BuyWrite Index rose 5.7%, the bourse’s S&P 500 PutWrite Index gained 6.1%, and its Dow Jones Industrial Average BuyWrite Index was up 7.9%.

One year’s data aren’t definitive, but studies measuring statistically significant eras of 10 years or more—essentially two market cycles—reinforce CBOE’s data. (A market cycle is the birth of a bull market, its death, and rebirth.) THOSE RESULTS ARE INCREASINGLY enticing stock investors, investment advisors and even big, old-line Boston mutual-fund firms to weigh options. A number of new buy-write funds that sell call options against stocks have started. And derivatives strategists say they are getting more inquiries from fund managers and advisors who want to learn more about using put and call sales to lift results and pare risk. …


Buy-write Strategy Gets Another Look

Traders Magazine

Jan. 20, 2012

By Peter Chapman

… mutual funds using covered calls showed signs of life last year. … “We have seen a huge uptick in retail,” Severson said, “especially in the $300,000 to $700,000 separately managed accounts.” The portfolio manager explains many individuals are switching to covered call investments from fixed income investments. …


Options Strategy Appeals, But Has Price

Chicago Sun-Times

January 15, 2012

By David Roeder

.. Wheaton-based PowerShares runs the largest exchange-traded fund that uses the technique for the S&P 500, and it reported a 4.21 percent gain for the year. The fund has a ticker symbol PBP. The Fidelity Spartan 500 Index Fund (FUSEX), in contrast, gained just 1.98 percent. So Brodsky is right about covered calls as opposed to just owning the stock, as least for 2011. …


Income-generating funds find favour

Financial Times

January 9, 2012

By Telis Demos

… The CBOE Dow Jones Industrial Average Buy-Write index, which tracks the strategy, returned 8 per cent last year. …


Buy-Write Is the Right Buy


By Steven M. Sears

Dec. 31, 2011

… In 2011, when the Standard & Poor’s 500 Index exhibited tremendous volatility, only to finish the year at roughly the same place that it began, the Chicago Board Options Exchange’s BuyWrite Index (BXM) rose 5.7%. …


Options for Nervous Investors

Wall Street Journal

Dec. 10, 2011

By Jack Hough

… Over 10 years through November, the BXM returned 4.2% a year, versus 2.9% for the S&P 500. Over 20 years, which counts the go-go 1990s, its lead is narrower: 8.4% versus 8.3%. During both periods its volatility was significantly lower than that of the S&P 500. …


Covered Calls Finish Strong In 2011

Seeking Alpha

By Bill Luby

January 4, 2012

… Note that PBP outperformed SPY by 7.7% during this six-month period, with considerably less volatility and also a less peak-to-trough drawdown…


Using the Buy-Write Strategy to Benchmark Your Portfolio, Smooth Returns

By Steve Smith

Dec 30, 2011

… But as the table below shows, 2011 was something of an outlier as the ^BXM provided 30 basis points over the ^PUT . My guess is that in 2011, as many companies returned to or increased their dividends, this accounted for the ^BXM outperformance. The largest drawdowns during 2011 were during late July to early August in which S&P declined 17%, ^BXM lost just 11% and the ^PUT declined 13% during the period.


Covered Call ETFs For A Volatile, Sideways Market

By Vince Martin

January 10, 2012 

… In 2011, the BXM finished up 5.7%, versus the essentially flat performance of the broader index. And as Barron’s noted last week, other variations of the strategy — writing cash-secured puts, or covered calls on different indices — performed even better. …


Pensions Eye Buy-Writes

Traders Magazine

December 2011

By Peter Chapman

… are all in various stages of adopting buy-write strategies benchmarked against the Chicago Board Options Exchange’s BXM index. The total to be hedged by all five plans could reach more than $1 billion. …


For more information on the CBOE 28th Annual Risk Management Conference (RMC), please visit