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The CBOE S&P 500 BuyWrite Index (ticker symbol BXM) on which the BXO is based is a broad-based benchmark index that tracks the performance of a hypothetical BuyWrite (covered call) strategy against a long portfolio of stocks in the S&P 500 Index. With $30 billion in BuyWrite products launched since CBOE's BXM Index was introduced in 2002, BXM Index options are a logical addition to CBOE's product mix. The options, based on 1/10th the value of the BXM, will allow flexibility in trading and managing risk in covered call portfolios and structured products.
"The CBOE S&P 500 BuyWrite Index was the first major benchmark index for options-related performance. The historical performance of the Index, which now dates back 22 years, makes it a valuable tool to assess the ways in which options can be used in allocating assets to boost risk-adjusted returns," said CBOE Chairman and CEO William J. Brodsky. "The addition of options on the CBOE S&P 500 BuyWrite Index further leverages the value of the underlying Index, putting into play another tool to manage portfolio performance."
Early in the decade, CBOE received general interest from institutional and individual customers in having the Exchange create a benchmark index to measure the performance of certain stock and options strategies. The BXM Index was developed by the CBOE in cooperation with Standard & Poor's. To help in the development of the BXM Index, the CBOE commissioned Professor Robert Whaley (then of Duke University) to compile and analyze relevant data from the time period from June 1988 through December 2001. The BXM price history recently was extended back to June 30, 1986. The BXM received the inaugural "most innovative index" award at the world's leading indexing conference.
Key facts about the performance of the BXM Index from June 1986 through July 31, 2008, include:
- The gross amount of premiums generated by the BXM Index was 1.6 percent per month;
- The BXM Index had about two-thirds the volatility of the S&P 500 - the standard deviation of monthly returns was 10.2 percent for BXM and 14.9 percent for the S&P 500;
- The BXM had annualized returns of 10.3 percent, slightly higher than the 10.1 percent for the S&P 500 total return index.
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CBOE S&P 500 BuyWrite Index Options Product Specifications |
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Underlying |
BXO is 1/10th the value of the CBOE BuyWrite Index (BXM). |
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Strike Price Intervals |
Minimum of one-point increments. |
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Strike (Exercise) Prices |
In-, at- and out-of-the-money strike prices are initially listed. New series generally will be added when the underlying shares trade through the highest or lowest strike price available and upon request. |
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Expiration Date |
Generally the third Friday of the expiring month. |
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Expiration Months |
Up to three near-term serial contracts and three contract months on the March quarterly cycle (March, June, September and December) |
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Last Trading Day |
Close of trading on the business day prior to the expiration date of each month. |
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Exercise Style |
European style - may be exercised only on the Expiration Date. |
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Settlement of Option Exercise |
Based on a Special Opening Quotation of the BXM Index. |
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Margin |
Uncovered writers must deposit 100% of the options proceeds plus 15% of the aggregate contract value (current BXO price multiplied by $100) minus the amount by which the option is out-of-the-money, if any. Minimum margin is 100% of the option proceeds plus 10% of the aggregate contract value. Long puts or calls must be paid in full. |
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Trading Hours |
8:30 a.m. - 3:15 p.m. (Chicago time) |
For a complete overview of CBOE S&P 500 BuyWrite Index options, see www.cboe.com/BXM.
CBOE BXM Index futures currently also are traded on the Index at the CBOE Futures Exchange (CFE).
CBOE, the largest options marketplace in the U.S. and the creator of listed options, is regulated by the Securities and Exchange Commission (SEC).For additional information about the CBOE and its products, access the CBOE website at: www.cboe.com.
