Barron’s – BXY Index Had Higher Returns with Less Risk

A news story by S.L. Mintz on pages S24 and S26 in this weekend’s Barron’s notes that –

“ … Covered call options can protect against a tumble. …  Many shareholders want to protect their gains without beating a hasty retreat to cash or bonds. … The CBOE S&P 500 2% OTM BuyWrite Index (BXY) uses S&P 500 covered call options … In the two decades ending on May 31, a dollar invested in the BXY became $6.12, versus $5.35 for … the S&P 500, … These total returns include reinvested dividends but not taxes or transaction costs. Better still, BXY outpaced the S&P with less risk, as indicated by a lower standard deviation.”

The CBOE S&P 500 2% OTM BuyWrite Index (BXY) uses the same methodology as the well-known CBOE S&P 500 BuyWrite Index (BXM), but the BXY Index is calculated using out-of-the-money S&P 500 Index (SPX) call options, rather than at-the-money SPX call options. The BXY Index yields lower monthly premiums than the BXM Index, in return for a greater participation in the monthly upside moves of the S&P 500.


In the 20-year period ending May 31, 2013, the BXY Index rose 512% and the S&P 500 (total return) index rose 435%.

33BXY SP May

In the 20-year period ending May 31, 2013, when compared to the S&P 500 (total return) index, the BXY Index had both higher annualized returns (9.5% vs. 8.8%) and lower standard deviation (12.8% vs. 15.1%).

33BXY S&P bar chart

Over the past 20 years, the BXM Index had lower returns and lower volatility than the S&P 500 Index.

To learn more about options-based benchmark indexes and read related studies by Ibbotson Associates, Cambridge Associates, and Hewitt EnnisKnupp, please visit

No Comments
Matt Moran

Matt Moran is vice president of business development for Chicago Board Options Exchange (CBOE), where he communicates with pension funds, mutual funds, and financial advisors. He has delivered more than 200 presentations worldwide on the topics of managing volatility and adding income with option-writing strategies. Previously,…