Cboe, CBSX, & CFE Press Releases


CBOE Announces New BXY BuyWrite Index

Using Out-Of-The-Money Calls; Strategy Can Boost Income and Risk-Adjusted Returns

Chicago IL and Boca Raton, FL - March 17, 2006 - The Chicago Board Options Exchange (CBOE) today announced that it will begin publishing the CBOE S&P 500 2% OTM BuyWrite Index (BXY) on Monday, March 20, 2006. The new index uses the same methodology as the widely accepted CBOE S&P 500 BuyWrite Index (BXM), but is calculated using out-of-the-money S&P 500 Index (SPX) call options, rather than at-the-money SPX call options.

"As the Index innovators, CBOE is now building on the success of the BXM and creating alternatives for different types of markets and for investors with different appetites for risk," said CBOE Chairman and CEO William J. Brodsky. "The recent popularity of the BuyWrite strategy can be attributed to the CBOE BXM, which was the first, and only, benchmark measure of this time-tested strategy and illustrated how the strategy can be used by individual investors as well as large money managers, to enhance returns and reduce risk."

Similar to the BXM, which was created by CBOE in 2002, the CBOE S&P 500 2% OTM BuyWrite Index is a benchmark index that measures the performance of a theoretical portfolio that sells S&P 500 Index (SPX) call options against a portfolio of the stocks included in the S&P 500 Index. Unlike the BXM Index, the BXY Index sells monthly call options that are 2% out-of-the-money, thus allowing investors to participate in some upside of the stock market. A "buy-write," also called a covered-call strategy, generally is considered to be an investment strategy in which an investor buys a stock or a basket of stocks, and also sells ("writes") call options that correspond to the stock or basket of stocks. This strategy can be used to enhance portfolio returns and reduce volatility.

The BuyWrite gained increased acceptance as a conservative strategy following the publication of a 2004 study by Ibbotson Associates, a leading research firm specializing in asset allocation, that concluded that the CBOE BXM had the best risk-adjusted performance of the major domestic and international equity-based indexes over the previous 16 years. Investors recently have allocated more than $20 billion in at least 40 BuyWrite funds.

Key points about the new CBOE BXY Index include the following:
- Buy-write strategies often tend to perform relatively well in markets with negative or slowly rising returns.

- The BXY Index was set to 100 at its base date of June 1, 1988, and it rose to 812.97 by March 10, 2006, an increase of approximately 713%.

- Buy-write strategies offer a tradeoff between options premium that help cushion downside moves of the market and limited participation in upside moves. The BXY strategy diversifies the buy-write opportunities currently provided by the BXM. It yields lower monthly premiums in return for a greater participation in the upside moves of the S&P 500.

- The expansion of investment choices provided by the BXY is illustrated by the following characteristics of the monthly rates of return for total return indexes from their June 1988 inception to the end of February 2006:

Annualized Returns:
- BXY - 12.7%
- BXM - 11.8%
- S&P 500 - 11.7%

- BXY - 11.3%
- BXM - 9.4%
- S&P 500 - 14.0%

CBOE will calculate and disseminate the BXY value at the end of each trading day. Historical daily values for the BXY are available dating back to 1988 on the CBOE website and from options price quote vendors. For more data and information about BXY and its use as a portfolio management tool, please visit www.cboe.com/BXY.

CBOE also calculates and disseminates the CBOE DJIA BuyWrite Index (BXD), that uses the DJX call options vs. a portfolio of the stocks included in the Dow Jones Industrial Average, and the CBOE NASDAQ-100 BuyWrite Index (BXN), based on the NDX options vs. the stocks included in the NASDAQ-100 Index. For more information on methodology, historical data, charts and comparisons for BXD, BXM, BXN and BXY, please visit: www.cboe.com/IndexSites.

CBOE, the world's largest options marketplace and the creator of listed options, is regulated by the Securities and Exchange Commission (SEC). For additional information about the CBOE and its products, visit the CBOE website at: http://www.cboe.com/

Lynne Howard-Reed
(312) 786-7123

Gary Compton
(312) 786-7612

CBOE® and Chicago Board Options Exchange® are registered trademarks of Chicago Board Options Exchange, Incorporated (CBOE). SPXSM, BXMSM, BXDSM, BXNSM and BXYSM are registered service marks of Chicago Board Options Exchange, Incorporated (CBOE). The methodology of the CBOE BuyWrite Indexes is owned by CBOE and may be covered by one or more patents or pending patent applications. Standard & Poor's®, S&P®, and S&P 500® are registered trademarks of The McGraw-Hill Companies, Inc. and are licensed for use by the CBOE. Nasdaq®, Nasdaq-100®, and Nasdaq-100 Index®, are trademarks of The Nasdaq Stock Market, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by the Chicago Board Options Exchange, Incorporated. Dow Jones, The Dow, DJIA and Dow Jones Industrial Average are registered trademarks of Dow Jones & Company, Inc. and are licensed for use by the Chicago Board Options Exchange, Incorporated. The CBOE S&P 500 BuyWrite Index (the "BuyWrite Index"), the CBOE Nasdaq-100 BuyWrite Index, and the CBOE DJIA BuyWrite Index are not derived, maintained, published, calculated or disseminated by the Corporations. Neither the BuyWrite Index nor any Derivative Product based on the BuyWrite Index has been passed on by the Corporations as to its legality or suitability. Such Derivative Products are not issued, endorsed, sold, sponsored, marketed or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the BuyWrite Indexes.CBOE's BuyWrite Indexes are designed to represent a proposed hypothetical buy-write strategy. Like many passive indexes, the BuyWrite Indexes do not take into account significant factors such as transaction costs and taxes and, because of factors such as these, many or most investors should be expected to underperform passive indexes. Investors attempting to replicate the BuyWrite Indexes should discuss with their brokers possible timing and liquidity issues. Transaction costs and taxes for buy-write strategies could be significantly higher than transaction costs for a passive strategy of buying-and-holding stocks. Past performance does not guarantee future results.