In a Dec. 22, 2012, Barron’s column entitled “Profiting From Selling Puts, Calls” Steven Sears wrote –
“ … In 2012 all of Wall Street and much of Main Street embraced options … It was a good year to sell calls. It was an even better year to sell puts. … By strategically selling puts and calls, investors can collect conditional dividends from the options market. … As of Thursday’s close, the Chicago Board Options Exchange’s BuyWrite Index (BXM) was up 5.4% on the year. The CBOE’s 2% OTM BuyWrite Index (BXY), which sells out-of-the-money calls, was up 10.4%. The S&P 500 PutWrite Index (PUT) was up 7.6%. … “
The four charts below present year-end updates on the PUT, BXY, BXM, and several other indexes. Many risk-averse, income oriented investors now are exploring these indexes.
The webpage www.cboe.com/benchmarks has more information on these indexes, and links to a number of papers on the selling of index options, including —
- Asset Consulting Group. Key Tools for Hedging and Tail Risk Management (February 2012)
- Hewitt EnnisKnupp. The CBOE S&P 500 BuyWrite Index (BXM) – A Review of Performance (2012)
- Asset Consulting Group. An Analysis of Index Option Writing for Liquid Enhanced Risk-Adjusted Returns (January 2012)
- Ibbotson Associates.“Highlights from Case Study on BXM Buy-Write Options Strategy.” (2004).
- Russell Investments. Capturing the Volatility Premium through Call Overwriting. (July 2012)