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