The new CBOE Dow Jones Industrial Average BuyWrite Index (BXD) is a benchmark index that measures the performance of a theoretical portfolio that sells DJX call options, against a portfolio of the stocks included in the Dow Jones Industrial Average (the Dow). A "buy-write," also called a covered call, generally is considered to be an investment strategy in which an investor buys a stock or a basket of stocks, and also sells call options that correspond to the stock or basket of stocks. This strategy can be used to enhance portfolio returns and reduce volatility.
CBOE also announced that it plans to offer the CBOE Dow Jones Industrial Average Volatility Index (VXD). The VXD will track the volatility of the Dow benchmark index, by measuring implied volatility of near-term DJX options. The VXD is designed to reflect investors' consensus view of future (30-day) expected market volatility in the DJIA, and as such, can be used as a benchmark of investor sentiment.
CBOE and Dow Jones plan to offer these two new indexes in response to customer demand for a quantified performance measure of the buy-write strategy using the DJX, and volatility of the widely followed Dow Jones Industrial Average index.
For more information on the methodology and historical data of the CBOE BuyWrite and Volatility Indexes, please visit: http://www.cboe.com/IndexSites .
