Bill Speth Discusses New CBOE Options-Based Benchmark Indexes

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.Ch-2015-03-04-1400-Weekly Benchmarks

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.