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- Cboe expands suite of option strategy benchmarks tied to the Russell 2000® Index with new Target Outcome Indices
- Target Outcome Index strategies have pre-defined investment objectives and risk-return parameters
- New indices aim to provide either 10% protection against declines (buffer protect) or 2x appreciation up to a cap (enhanced growth) relative to the Russell 2000 Index
Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today announced that Cboe Global Indices, LLC has expanded its family of Target Outcome Indices with the addition of two new series of indices tied to the Russell 2000 Index: the Cboe Russell 2000 Enhanced Growth Index Series (RPEN) and Cboe Russell 2000 Buffer Protect Index Series (RPRO).
Target Outcome Indices are options-based strategy benchmarks that are designed to provide targeted returns relative to a referenced U.S. domestic stock market index and in some cases (buffer protect strategies), to limit downside risk.
The new Cboe Russell 2000 Target Outcome Indices measure the performance of a hypothetical portfolio of FLexible EXchange® (FLEX®) Options that aim to provide exposure to the Russell 2000 Index, where the downside protection, upside growth potential and outcome period are all pre-determined. FLEX Options are customizable contracts that allow users to specify key contract terms, including strike prices, exercise styles and expiration dates.
Bruce Traan, Head of Cboe Global Indices, said: "Cboe's Target Outcome Indices have enabled the launch of a new category of financial products with pre-defined investment objectives and risk-return parameters, based on strategic investments in FLEX Options. We are pleased to roll out additional indices tied to the widely followed Russell 2000 Index, further broadening our suite of Target Outcome Indices supporting the growing interest of options-based strategies that provide a combination of growth potential and downside risk mitigation."
Each of the new indices tracks the return of a hypothetical investment portfolio designed to generally track the Russell 2000 Index but that, over a one year outcome period, either provides protection against the first 10 percent of losses due to a decline in the Russell 2000 Index (buffer protect strategy) or provides 2x the appreciation of the Russell 2000 Index up to a cap level (enhanced growth strategy). The cap level is determined on each annual option roll date.
Buffer protection target outcome strategies can be used as a risk management tool, or tactically, in bear or range-bound markets, while enhanced growth target outcome strategies can be used in most market environments as long-term growth tools, or tactically, in modest bull or range-bound market environments.
Catherine Yoshimoto, Director, Product Management, FTSE Russell, said: "FTSE Russell has a strong relationship with Cboe and is pleased to continue our collaboration in the target outcome indexing space. Leveraging our combined strengths in index development and derivatives trading, the new indices provide an innovative way for investors to gain defined exposures to the Russell 2000 Index – one of the world's most widely recognized benchmark for small-cap U.S. equities."
The Cboe Russell 2000 Enhanced Growth Index Series (RPEN) and Cboe Russell 2000 Buffer Protect Index Series (RPRO) each include a series of 12 monthly indices comprised of hypothetical investments FLEX Options that are rolled into new positions at annual expirations. A composite index is compiled giving equal weight to the returns of the 12 monthly indices. For additional information about Cboe's family of Target Outcome Indices, please visit https://www.cboe.com/index.
