New Study Compares 25-Year Performance of Options Strategy Benchmarks to Traditional Indexes;

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CHICAGO, Feb. 14, 2012 /PRNewswire/ -- The merits of using options-based strategy benchmark indexes to construct a diversified portfolio is the subject of a new study -- "An Analysis of Index Option Writing for Liquid Enhanced Risk-Adjusted Returns" — released today by investment-advisory firm Asset Consulting Group


The study, commissioned by Chicago Board Options Exchange (CBOE), evaluates the performance of four key options strategy benchmark indexes: the CBOE S&P 500 BuyWrite Index (BXM), CBOE S&P 500 PutWrite Index (PUT), CBOE S&P 500 2% OTM BuyWrite Index (BXY) and CBOE S&P 500 95-110 Collar Index (CLL) against  more "traditional" stock and bond indexes.

The study provides an assessment of options-based strategy benchmark index performance over a 25-year period. It highlights key benchmark index effectiveness in helping to generate income and limit volatility exposure in various market environments, including periods marked by flat stock market performance, low interest rates and recurring market volatility.

Highlights of the Study:

  • Index Growth: Based on one dollar invested on June 30, 1986, index growth through December 31, 2011 was: 1153 percent for the PUT Index, 830 percent for the BXM Index, 807 percent for the S&P 500 Index, and 368 percent for the CLL Index.
  • Lower Volatility: PUT, BXM and CLL indexes each exhibited volatility that was about 30 percent lower than S&P 500 Index volatility. BXY exhibited volatility that was about 17 percent lower than the S&P 500 Index.
  • Left Tail Risk: While investors are primarily focused on returns, in recent years many investors also have become as concerned about mitigating the risk of large portfolio losses, also known as "tail risk."  The study showed that over the past 25 years, the worst monthly loss for the S&P 500 Index was a decline of 21.5 percent, compared to a relatively modest 8.6-percent monthly decline for the CLL Index.
  • Monthly Premium Income: The BXM Index collected high gross monthly premiums — 1.8 percent per month on average — attractive income in a low-yielding interest rate environment.  

Overview of Strategy Benchmarks:

  • CBOE S&P 500 BuyWrite Index (BXM) is based on buying an S&P 500 Index portfolio and selling the near-term S&P 500 at-the-money "covered" call options and holding the options position until it is cash-settled at expiration, at which time a new one-month at-the-money call is sold.
  • CBOE S&P 500 PutWrite Index (PUT) is based on selling a near-term fully cash-secured S&P 500 at-the-money put option that is cash settled and re-written (sold) on the third Friday of the following contract month.
  • CBOE S&P 500 2% OTM BuyWrite Index (BXY) is identical methodology as the BXM, except that the monthly S&P 500 near-term calls are sold at 2% out-of-the-money.
  • CBOE S&P 500 95-110 Collar Index (CLL) is based on buying an S&P 500 stock index portfolio, buying a three-month S&P 500 put at 95 percent of the S&P 500 value and selling a one-month S&P 500 call at 110 percent of the S&P 500 value.  The calls are re-sold monthly, and the puts are repurchased every three months.  The "collar" implies that both the potential profit and loss is limited ("collared").

The Asset Consulting Group study covered time periods through the end of 2011. As an update, BXM, BXY and PUT all reached their all-time-high daily closing prices yesterday. On February 13, BXM closed at 882.50, BXY closed at 1112.71, and PUT closed at 1159.81.

In its continuing efforts to provide education for institutional investors, CBOE and S&P Indices provided funding for this study.  The full Asset Consulting Group study, as well as a complete listing of CBOE's previously commissioned options-based strategy studies, can be found at

About CBOE Holdings, Inc. 
 CBOE Holdings, Inc. (NASDAQ: CBOE) is the holding company for Chicago Board Options Exchange (CBOE), C2 Options Exchange and other subsidiaries.  CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options trading through product innovation, trading technology and investor education. CBOE offers equity, index and ETF options, including proprietary products, such as S&P 500 options (SPX), the most active U.S. index option, and options on the CBOE Volatility Index (the VIX Index). Other products engineered by CBOE include equity options, security index options, LEAPS options, FLEX options, and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE's Hybrid Trading System incorporates electronic and open-outcry trading, enabling customers to choose their trading method. CBOE's Hybrid is powered by CBOEdirect, a proprietary, state-of-the-art electronic platform that also supports C2 Options Exchange (C2), CBOE Futures Exchange (CFE), CBOE Stock Exchange (CBSX) and OneChicago. CBOE is home to the world-renowned Options Institute and, named "Best of the Web" for options information and education. CBOE is regulated by the Securities and Exchange Commission (SEC), with all trades cleared by the OCC.

About Asset Consulting Group (ACG)
Asset Consulting Group (ACG) is an institutional Investment Consultant that provides comprehensive investment consulting and investment supervisory services to taxable and tax-exempt investors such as trusts, endowments, foundations and other non-profit corporations, insurance company reserves, and corporate, public, Taft-Hartley employee benefit plans, high net worth individuals, and estates ("Clients").  ACG has provided investment consulting and investment supervisory services since 1989.  ACG consults to approximately 80 clients across the United States and Puerto Rico with aggregate assets of more than $60 billion.  ACG is a research driven firm with 45 employees, 16 of whom are CFA Charter holders.  ACG is widely recognized for providing high quality consulting services in the areas of Asset Allocation Advice, Portfolio Construction, Manager Selection and monitoring and Trustee Education.  ACG has built its practice on the foundation of being an objective third party advisor to our clients. As such, ACG has no relationships or arrangements with money managers to recommend or place them with clients.

ACG was compensated by the Chicago Board Options Exchange for the preparation of this paper.

CBOE®, Chicago Board Options Exchange®, CBSX®, CBOE Stock Exchange®, CFE®, CBOEdirect®, FLEX®, Hybrid®, LEAPS®, CBOE Volatility Index® and VIX® are registered trademarks, and BuyWrite, BXM(SM), BXY(SM), CLL(SM), PUT(SM), SPX(SM), CBOE Futures Exchange(SM) and The Options Institute(SM) are service marks of Chicago Board Options Exchange, Incorporated (CBOE). C2(SM), C2 Options Exchange(SM) and SPXpm(SM) are service marks of C2 Options Exchange, Incorporated (C2).  Standard & Poor's®, S&P® and S&P 500® are registered  trademarks of Standard & Poor's Financial Services, LLC and have been licensed for use by CBOE.   All other trademarks and service marks are the property of their respective owners. 

The BXM, BXY, CLL and PUT indices ("CBOE Strategy Indices") are designed to represent proposed hypothetical strategies. The actual performance of investment vehicles such as mutual funds can have significant differences from the performance of the hypothetical indices. Like many passive indices, the CBOE Strategy Indices do not take into account significant factors such as transaction costs and taxes. The ACG study contains index performance data based on back-testing. Investors attempting to replicate the CBOE Strategy Indices should discuss with their advisors possible timing and liquidity issues. Past performance does not guarantee future results. The methodologies of the CBOE Strategy Indices are owned by CBOE and may be covered by one or more patents or pending patent applications. CBOE's options based on S&P 500 indexes and financial products based on the CBOE Strategy Indices are not sponsored, endorsed, marketed or promoted by Standard & Poor's. The information contained in the ACG study is based on information obtained by ACG from sources that are believed to be reliable. Opinions and estimates offered constitute ACG's judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. The information provided in the ACG study is believed to be reliable, but ACG and CBOE do not warrant its accuracy or completeness. The ACG study is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. The ACG study has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. The views expressed in the ACG study are those of Asset Consulting Group. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm.



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