Standard & Poor's and the Chicago Board Options Exchange (CBOE) today announced that a license was granted giving Ansbacher Investment Management, Inc. the right to use the CBOE S&P 500 PutWrite Index (PUT) as the strategic basis for a new options investment vehicle. Ansbacher Investment Management, Inc. (AIM), based in Manhattan, is an investment firm devoted exclusively to managing options strategies.
PUT is a new benchmark index, created by CBOE, that measures the performance of a hypothetical portfolio that sells S&P 500 Index (SPX) put options against collateralized cash reserves held in a money market account.
The PUT Index is similar in theory to the CBOE S&P 500 BuyWrite Index (BXM), which measures the performance of a hypothetical portfolio that sells SPX call options against a long portfolio of the stocks in the S&P 500 Index. However, the PutWrite strategy sells SPX put options against cash that is held in reserve in a money market account. The number of puts sold is set to collateralize the exposure to S&P 500 downturns.
Key points about the CBOE S&P 500 PutWrite Index in the period from June 1, 1988 through May 31, 2007:
- Higher Returns.The PUT Index had an annualized return of 12.6% compared to 12.1% for the S&P 500 Total Return Index (SPTR), 11.8% for the BXM and 4.7% for three-month Treasury Bills.
- Lower Volatility.The standard deviation of the PUT was smaller than that of both the BXM and S&P 500 Index. The standard deviation of the monthly returns for PUT was about 61% of the S&P 500 Index.
- Relative Performance in Different Types of Markets.Historically, the PUT and BXM have tended to outperform the S&P 500 Index in flat or downward trending markets. In past years, the PUT has had its best performance relative to the S&P 500 Index during periods of higher volatility.
- Total Growth.The PUT Index was set to 100 at its base date of June 1, 1988, and rose to 961.10 by May 31, 2007, an increase of approximately 861% compared to a 731% increase for the BXM over the same time period.
The CBOE PUT strategy is designed to sell a sequence of one-month, at-the-money, S&P 500 Index puts and invest cash in one- and three-month Treasury Bill rates. The number of puts sold varies from month to month, but is limited so that the amount held in Treasury Bills can finance the maximum possible loss from final settlement of the SPX puts. In the worst-case scenario, the amount at risk for the PUT investor is limited to the amount that was invested. The number of puts sold increases with Treasury Bill rates and the price of the put, and decreases with the strike price of the put.
CBOE calculates the PUT value at the end of each trading day and disseminates it on the CBOE website and through options quote vendors. On any given date, the index represents the value of the initial $100 invested in the PUT strategy at inception. At the close of every business date, the value of the PUT is equal to the value of the Treasury Bill account, less the mark-to-market value of the puts.
Historical values for the PUT are available dating back to 1988 on the CBOE website. For more data and information about the PutWrite Index please visit http://www.cboe.com/PUT.
About Ansbacher
Ansbacher Investment Management, Inc. (AIM), founded in 1995, is located in Manhattan, New York and manages index option strategies for a wide range of institutional and private clients. For more information about Ansbacher Investment Management visit http://www.ansbacherusa.com/
About CBOE
CBOE, the largest U.S. options exchange and 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: http://www.cboe.com/.
