Cboe, CBSX, & CFE Press Releases


CBOE Announces New CBOE S&P 500 PutWrite Index (PUT); Strategy Can Boost Income and Risk-Adjusted Returns

CHICAGO, IL June 20, 2007 - The Chicago Board Options Exchange (CBOE) today announced that CBOE will begin publishing the CBOE S&P 500 PutWrite Index (ticker symbol PUT) today, June 20, 2007. PUT is a new benchmark index 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.

"CBOE is building on the tremendous success of the performance of the original CBOE BuyWrite Index, the BXM, by creating alternatives for investors with a variety of portfolio profiles and with different appetites for risk," said CBOE Chairman and CEO William J. Brodsky. "Currently, there is an estimated $30 billion allocated to more than 45 buy-write investment products that have been launched since the 2002 introduction of the BXM Index. The PutWrite, along with the other CBOE BuyWrite Indexes, allows investors to pick the benchmark index that best suits their market views and investment goals."

"The PutWrite will be especially appealing for asset managers who have cash reserves and are looking for higher returns," said CBOE Vice President of Research and Product Development Joe Levin. "The PutWrite Index collects more premiums than the BXM due to the fact that the strategy sells more than one option per position. However, it still maintains the conservative features of a traditional buy-write strategy."

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.

- Performance in Different Types of Markets.Buy-write strategies often tend to perform relatively well in markets with negative or slowly rising returns.The PutWrite strategy performs well in a flat or downward trending market, and historically has had its best performance during periods of higher volatility.

- Total Growth. The PUT Index was set to 100 at its base date of June 1, 1988, and it 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 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.

The expansion of investment choices provided by the CBOE BuyWrite Indexes and the PutWrite Index is illustrated by the following characteristics of the monthly rates of return and standard deviation (or volatility) from June 1988 to the end of April 2007:

Ticker Symbol
Annualized Returns
Standard Deviation
CBOE S&P 500
PutWrite Index
CBOE S&P 500
BuyWrite Index
CBOE S&P 500 2% Out-of-The-Money BuyWrite Index
S&P 500 Total Return Index


CBOE will calculate the PUT value at the end of each trading day and disseminate it on the CBOE website and to 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.

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/.

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. SPXSM, BXMSM, PUTSM, and BXYSM are service marks of CBOE. The methodologies of the CBOE BuyWrite Indexes and the PutWrite Index are 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 CBOE. The CBOE S&P 500 PutWrite Index is designed to represent a proposed hypothetical short put strategy. Like many passive indexes, the PUT Index does 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. In the construction of the hypothetical

PUT index, the SPX puts are assumed to be written at a certain price on the third Friday of the month. However, there is no guarantee that all investors will be able to sell at this price, and investors attempting to replicate the PUT Index should discuss with their brokers possible timing and liquidity issues. Transaction costs for a put writing strategy such as the PUT could be significantly higher than transaction costs for a passive strategy of investing in Treasury Bills. Past performance does not guarantee future results.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state or jurisdiction in which an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

In connection with the proposed restructuring transaction, CBOE Holdings, Inc. ("CBOE Holdings") has filed certain relevant materials with the United States Securities and Exchange Commission (SEC), including a registration statement on Form S-4. Members are encouraged to read the registration statement, including the proxy statement/prospectus that are a part of the registration statement, because it contains important information about the proposed transaction. Members are able to obtain a free copy of the proxy statement/prospectus, as well as the other filings containing information about CBOE Holdings and the Chicago Board Options Exchange, Incorporated ("CBOE"), without charge, at the SEC's Web site, http://www.sec.gov/, and the companies' website, http://www.cboe.com/. In addition, CBOE members may obtain free copies of the proxy statement/prospectus and other documents filed by CBOE Holdings or the CBOE from CBOE Holdings by directing a request to the Office of the Secretary, CBOE Holdings, Inc., 400 South LaSalle Street, Chicago, Illinois 60605.

CBOE Holdings, the CBOE and their respective directors, executive officers and other employees may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information about the directors and executive officers of CBOE Holdings and of the CBOE is available in the prospectus/proxy statement.