The S&P 500 gave back some of the recent gains this past week while the strategy indexes didn’t do much at all. In fact the chart below showing the PUT price action made me double check the data before publishing this blog.
The reason behind the tame performance out of BXM, BXY, and PUT relates to where we are in the option expiration cycle. Specifically we are approaching standard third Friday of the month expiration for all options, but with respect to the strategy indexes this means there will be options expiring on the open Friday morning that will be replaced with SPX options mid-morning Friday that expire on July 18. Currently the BXM is short SPX Jun 1870 Calls which took in 24.66 in premium back on May 16th. BXY sold SPX Jun 1910 Calls at 7.21 and PUT sold SPX Jun 1870 Puts at 26.10 on the same day. Both the short calls in the BXM and BXY strategies are deep in the money so there is very little time value and the options gain and lose value in synch with a rise and fall in the S&P 500. In the case of the PUT strategy the SPX Jun 1870 Put is trading at about 1.00 which is all time value and that value is decreasing slowly with the result being little performance out of PUT this past week.
Come Friday we will see rebalancing and on Friday night I’ll post a strategy index update along with a discussion of how the monthly roll plays out for all three strategies. In the mean-time to get more insight into the roll process you can visit www.cboe.com/bxm , www.cboe.com/bxy, or www.cboe.com/put.