Pop Quiz: Which Russell 2000 Index is Outperforming in 2015?

Russell 2000 Index (RUT) or CBOE Russell 2000® BuyWrite Index (BXR)

Before I answer my own question let’s take a moment and refresh our memory on what is the CBOE Russell 2000 BuyWrite Index BXR℠.

The CBOE Russell 2000 BuyWrite Index is an investment strategy benchmark index designed to track the performance of a hypothetical at-the-money buy-write strategy on the Russell 2000 Index.  It’s intended to measure the total rate of return consisting of a “long” position indexed to the Russell 2000 Index and the dollar equivalent “short” position in the one-month, at-the-money call options on the cash-settled Russell 2000 Index.  The BXR Index does not take into account transaction costs and taxes.

Generally a “buy-write” strategy is used to enhance portfolio returns and reduce volatility.  Through October 2015, monthly returns on the Russell 2000 Index were down 5 out of 10 months.  The CBOE Russell 2000 BuyWrite Index was down 3 out of 10 months but outperformed the Russell 2000 Index 7 out of 10 months. rr4

Year-to-Date (11/6/15) performance of the CBOE Russell 2000 BuyWrite Strategy Index is +5.50% compared to the Russell 2000 Index -.41%rr5 Source: Bloomberg

Although the past performance of both the Russell 2000 Index (RUT) and the CBOE Russell 2000 BuyWrite Index (BXR) is no indication of future performance BXR has demonstrated during periods of volatility the strategy is effective in reducing volatility and enhancing overall returns.

For additional information on CBOE Russell 2000 BuyWrite Index (BXR) visit:

www.cboe.com/BXR

Post written by Rick Rosenthal, CBOE Business Development