CBOE Introduces New CBOE S&P 500 95-110 Collar Index: New Benchmark To Protect Against Market Declines

The Chicago Board Options Exchange (CBOE) today announced that the Exchange will begin publishing data associated with a new collar index, the CBOE S&P 500 95-110 Collar Index (ticker symbol CLL).

The new benchmark index, which further diversifies CBOE's suite of option-based strategy benchmarks, is designed to protect an investment in S&P 500 stocks against market declines. The passive collar strategy reflected by the index entails:

- Holding the stocks in the S&P 500 Index;

- Buying three-month S&P 500 (SPX) put options to protect this S&P 500 portfolio from market decreases; and

- Selling one-month S&P 500 (SPX) call options to help finance the cost of the put options.

The term "95-110" is used to describe the CLL Index because (1) the three-month put options are purchased at a strike price that is about 95 percent of the value of the S&P 500 Index at the time of the purchase (in other words, the puts are about five percent out-of-the-money), and (2) the one-month call options are written at a strike price that is about 110 percent of the value of the S&P 500 Index at the time of the sale (in other words, the calls are about ten percent out-of-the-money).

"In recent decades, many prudent investors have used the collar strategy as a low-cost way to hedge, monetize and diversify their investment portfolios with minimal downside risk," said CBOE Chairman and CEO William J. Brodsky. "CBOE has been recognized as the leader in the development of innovative risk management benchmark indexes, and now we are pleased to introduce the CBOE S&P 500 95-110 Collar Index. This is CBOE's first benchmark index to incorporate the downside protection of protective puts on the S&P 500 Index, financed by the sale of SPX call options. It will prove to be a valuable resource for investors who want ways to manage their portfolio risk in bear markets."

The initial base price of the CLL Index was set to 100 on June 30, 1986, and the CLL Index rose more than 500 percent by July 31, 2008.Due to the fact that the CLL Index buys three-month SPX puts on the third Friday of every third month, an investor has the ability to examine three-month periods to see whether the

Index puts used by the CLL Index have lessened the downside risk of stock portfolios.Since mid-1986, the S&P 500 Index has experienced declines of ten percent or more in 15 different three-calendar-month periods (some of which have had some overlap with each other).In all 15 time periods, the CLL Index outperformed the S&P 500 total return index.For example, in the September-through-November 1987 time period, the S&P 500 was down 29.6 percent, and the CBOE S&P 500 BuyWrite Index (BXM) was down 23.8 percent, while the CLL was down 10.1 percent.In the July-through-September 2001 time period, the S&P 500 dropped 14.7 percent, BXM Index fell 12.5 percent, and the CLL Index remained almost flat with a drop of just 0.7 percent.Conversely, with a collar strategy an investor foregoes some upside potential in return for the downside protection; as a result, the CLL Index has often underperformed when the S&P 500 has some big upward moves.

For a complete overview of the CBOE S&P 500 95-110 Collar Index, visit www.cboe.com/CLL.