On Wednesday at the Risk Management Conference (RMC), a presentation on New CBOE Options-Based Benchmark Indexes was William Speth, Vice President, Research and Product Development, CBOE.
Mr. Speth made a number of points, including —
- CBOE now offers benchmark indexes with systematic use of options / futures to achieve an investment objective such as (1) Enhance Yield, with e.g., CBOE® S&P 500® BuyWrite Index (BXMSM), and CBOE® Russell 2000® BuyWrite Index (BXR), and (2) Reduce Risk, withCBOE® S&P 500® 95-110 Collar Index (CLL) and CBOE® VIX® Tail Hedge Index (VXTH).
- CBOE is exploring the possibility of introducing new benchmark index(es) that use S&P 500 Weekly (SPXW) Options.
CBOE is exploring a number of risk-reducing strategies, including —
- Zero-Cost Collar
Buy 1M 2.5% OTM SPX Put
Sell 1M OTM SPX Call to cover cost of put
Avg. cost 1%; Avg. upside cap 1.5%*
(* Based on roll activity from January 1992)
- Zero-Cost Put Spread Collar (1M)
Buy 1M 2.5% OTM SPX Put / Sell 1M 5% OTM SPX Put
Sell 1M OTM SPX Call to cover cost of put spread
Avg. cost 0.5%; Avg. upside cap 3.5%
- Zero-Cost Put Spread Collar (3M)
Buy 3M 2.5% OTM SPX Put / Sell 3M 5% OTM SPX Put
Sell 3M OTM SPX Call to cover cost of put spread
Avg. cost 0.75%; Avg. upside cap 7.5%
In 2015 CBOE plans to introduce:
- CBOE Rolling Weekly BuyWrite Index Series
- CBOE Zero-Cost Put Spread Collar Index Series
- Benchmark indexes with different underlyings – S&P, FTSE-Russell, MSCI
- Next Generation Strategy Benchmarks could include –
- “Smart” BuyWrites, PutWrites & Collars
- Straddles, Strangles, “Condors”
- “Hybrid” Hedging / Yield Enhancing Strategies
- Combining VIX / Index exposures
For more information on CBOE benchmark indexes and related white papers on analysis of performance, please visit www.cboe.com/benchmarks.