The CBOE S&P 500 BuyWrite Index (BXM )
SM
Quick Reference Guide
January 2005
BXM and S&P 500
(June 1988-December 2004)
40%
BXM
30%
S&P 500
Need a cushion against downside
moves in the market?
20%
600
10%
S&P 500
BXM
300
Are you willing to limit upside potential
in return for potentially less volatility
in your portfolio?
0%
-10%
-20%
0
-30%
2001
2004
2000
2003
1999
2002
1998
2001
1997
2000
1996
1999
1995
1998
1994
1997
1993
1996
1994
1992
BXM 25.0% 4.0% 24.4% 11.5% 14.1% 4.5%
S&P 500 31.7% -3.1% 30.5% 7.6% 10.1% 1.3%
1995
1993
1991
1992
1990
1991
1989
1990
1989
n-0 3
30- Ju
n-0 0
30- Ju
n-9 7
30- Ju
n-9 4
30- Ju
n-9 1
28- Ju
n-8 8
30- Ju
Month-end Prices for Total Reurn Indexes
(scaled so that
both = 100 on June 1, 1988)
BXM & S&P 500 - Annual % Price Changes
50%
Month-end Price Graph
900
Want extra income for your equity
portfolio?
2002
2003
2004
21.0% 15.5% 26.6% 18.9% 21.2% 7.4% -10.9% -7.6% 19.4% 8.3%
37.6% 23.0% 33.4% 28.6% 21.1% -9.1% -11.9% -22.1% 28.7% 10.9%
Market Line of Return and Risk
Returns and Volatility
June 1988 - December 2004
June 1988 - December 2004
15%
Standard
Deviations
S&P 500 12.1%
BXM 9.8%
S&P 500 14.6%
Rate of Return
Annualized
Returns
BXM
12%
BXM 12.2%
Explore
The CBOE S&P 500 BuyWrite Index
(BXM), the first major benchmark for
BuyWrite options performance, with
daily data dating back to June 1988.
S&P 500
9%
6%
LIBOR
3%
SM
0%
0%
3%
5%
8%
10%
13%
15%
Standard Deviation
Sources: CBOE and Bloomberg. The figures above contain numbers for the BXM and S&P 500 total return indexes (which include reinvested dividends, but do not take into
account transaction costs and taxes). Please see the Risk Disclosures on the opposite side and at www.cboe.com/bxm for more information.
www.cboe.com/bxm
The CBOE S&P 500 BuyWrite Index (BXM )
SM
Methodology for Calculating the BXM Index
·
4Passive total return index set to 100 on June 1, 1988, reflecting this strategy:
·
4Buy a S&P 500 stock index portfolio
·
4Write (or sell) a covered S&P 500 Index call option, usually in the morning of the third Friday of every
month. The SPX call that is sold (or written) is held until its expiration.*
Data Since June 1988
Daily prices are provided for the BXM Index going back to June 1, 1988 (the first day that Standard and Poor's
began reporting the daily cash dividends for the S&P 500 Total Return Index).*
Low Volatility
A potentially attractive feature to some investors has been the relative steadiness and low volatility of BXM returns.
From June 1988 through December 2003, the annualized standard deviation of returns was 14.7 for the S&P 500
and 9.9% for BXM.*
January 2005 Quick
Information on S&P 500® (SPX ) Index Options
TM
Volume and Open Interest
In 2003, the S&P 500 index options had an average daily volume of 196,318 and year-end open interest of 5 million contracts.
No Early Exercise
Unlike equity and certain other index options, SPX call options have "European-style" exercise, that is, SPX options generally may
be exercised only on the last business day before expiration.
Cash-settlement and “A.M.-settlement
SPX options are cash-settled (i.e., there is no delivery of stocks) and have "A.M.-settlement," usually on the third Friday of the
month. Please see www.cboe.com/spx for more information.
More Information on Index Options Strategies. Investors can learn more about index options by visiting www.cboe.com/index,
exploring the CBOE's Index WorkbenchSM at www.cboe.com/workbench, and by taking a course at the Options Institute.
S&P 500 (SPX) Options
Returns in Different Types of Market Environments
In times of flat to declining markets (e.g., in 2000 - 2002), the added income from the covered calls in a BXM
position often provided a cushion to downside market movements. On the other hand, in times when the stock
market was rising rapidly (e.g., in 1995 - 1998), SPX buy-write strategies generally underperformed the S&P 500.*
Sources of Returns
The BXM Index is designed to reflect the gaining of income from monthly sales of S&P 500 options. In addition,
according to Professor Whaley of Duke University, a source of returns during the 1988 - 2001 time period was the
fact that implied volatility usually was higher than realized volatility.*
Reference Guide
Average Daily Volume
196,318
145,852
87,286
97,868
118,808
* Please see the charts, tables and publications at the BXM website www.cboe.com/bxm for more specific information on
specifications, risks, returns and daily prices.
2000
2001
2002
2003
2004
Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options, which is available from your broker, by calling 1-888-OPTIONS, or from The Options
Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, IL 60606. Supporting documentation for claims, comparisons, statistics or other technical data is available by calling 1-888-OPTIONS, sending an e-mail to help@cboe.com, or by visiting
www.cboe.com/bxm. S&P 500® is a registered trademark of The McGraw-Hill Companies, Inc. and is licensed for use by the CBOE. CBOE calculates and disseminates the BXM Index. The BXM Index was developed by the CBOE in cooperation with Standard & Poor's.
The CBOE has a business relationship with Standard & Poor's on the BXM. Visit www.cboe.com/bxm for more detailed explanation. Past performance is not a guarantee of future returns. SPXTM and BXMSM are servicemarks of the CBOE. Copyright © Chicago Board
Options Exchange®, Incorporated, 2005. All Rights Reserved.
www.cboe.com/bxm