CBOE Launches 5 New Strategy Benchmark Indexes on Russell® 2000 Index

Monday marked the launch of 5 Strategy Benchmark Indexes based on the Russell 2000 Index.  Created by the Chicago Board Options Exchange, these options based strategies have been used previously as risk management and yield-enhancing tools.

CBOE Russell 2000 PutWrite Index (PUTR)

The CBOE Russell 2000 PutWrite Index is designed to track the performance of a hypothetical strategy that sells a monthly at-the-money (ATM) Russell 2000 Index put option. The written Russell 2000 put option is collateralized by a money market account invested in one-month Treasury bills.  The PUTR Index rolls on a monthly basis, typically every third Friday of the month.

CBOE Russell 2000 Zero-Cost Put Spread Collar Index (CLLR)

The CBOE Russell 2000 Zero-Cost Put Spread Collar Index is designed to track the performance of a hypothetical option trading strategy that 1) holds a long position indexed to the Russell 2000 Index; 2) on a monthly basis buys a 2.5% – 5% Russell 2000 Index put option spread; and 3) sells a monthly out-of-the-money (OTM) Russell 2000 call option to cover the cost of the put spread.  The CLLR Index rolls on a monthly basis, typically every third Friday of the month.

CBOE Russell 2000 30-Delta BuyWrite Index (BXRD)

The CBOE Russell 2000 30-Delta BuyWrite Index is designed to track the performance of a hypothetical covered call strategy that holds a long position indexed to the Russell 2000 Index and sells a monthly out-of-the-money (OTM) Russell 2000 Index call option. The call option written is the strike nearest to the 30 Delta at 10:00 a.m. CT on the Roll Date.  The BXRD Index rolls on a monthly basis, typically every third Friday of the month.

CBOE Russell 2000 Conditional BuyWrite Index (BXRC)

The CBOE Russell 2000 Conditional BuyWrite Index is designed to track the performance of a hypothetical covered call strategy that holds a long position indexed to the Russell 2000 Index and sells a monthly at-the-money (ATM) Russell 2000 Index call option. The written number of ATM call options will be either ½ unit or 1 unit and will be determined by the level of the CBOE Russell Volatility Index (RVX Index) when the call option is written on the Roll Date.  The BXRC Index rolls on a monthly basis, typically every third Friday of the month.

CBOE Russell 2000 One-Week PutWrite Index (WPTR)

The CBOE Russell 2000 One-Week PutWrite Index is designed to track the performance of a hypothetical strategy that sells an at-the-money (ATM) Russell 2000 Index put option on a weekly basis. The maturity of the written SPX put option is one week to expiry. The written SPX put option is collateralized by a money market account invested in one-month Treasury bills.  The WPTR Index rolls on a weekly basis, typically every Friday.

Improve Risk Adjusted Returns

The annualized returns and standard deviations were calculated based using time periods from their launch through the end of 2014.  A standout performer is the PutWrite strategies which generate higher risk adjusted returns as seen by the graphs below (note WPTR data commences in Mar 2011 and BXRC data commences in Jan 2004).

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Annual Performance Comparisons

Whether expressing a view on the market cycle or volatility, the launch to these strategy index benchmarks allows you now have the ability to measure performance of an outright position relative to a risk adjusted strategy.

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