Cboe, CBSX, & CFE Press Releases


New Study Issued by Fund Evaluation Group on The CBOE DJIA BuyWrite Index (BXD), CBOE DJIA Volatility Index (VXD), and Impact on Risk-Adjusted Returns

Chicago, March 2, 2007 - The Chicago Board Options Exchange (CBOE) announced today the results of a new study done by Fund Evaluation Group (FEG), a leading investment advisory firm. The study, which was commissioned by CBOE, is entitled "Evaluation of BuyWrite and Volatility Indexes - Using the CBOE DJIA BuyWrite Index (BXD) and the CBOE DJIA Volatility Index (VXD) for Asset Allocation and Diversification Purposes."The paper studied the 109-month period from October 1997 to November 2006, and compared the performance of the BXD Index to several equity and fixed income benchmarks, and studied the impact of allocating a portion of a portfolio to the VXD Index.

Performance of the CBOE DJIA BuyWrite Index (BXD)
The FEG study presented several findings on the 9-year performance of the BXD Index, including:

- Diversification and Reduced Volatility.The volatility of the BXD was 25% less than that of the DJIA and 46% lower than the Russell 2000. The study found that if an investor had allocated 25% of an otherwise all-stock portfolio to the BXD, the portfolio volatility would have declined by about 9%.

- Income Generation.Selling index options 12 times per year can produce significant income. Over the 109-month period studied, the average monthly options premium received was 1.84%, or an annualized rate of 24.46%.

- Improved Risk-Adjusted Returns. Incorporating a 10% allocation to the BXD could have improved the risk-adjusted returns (as measured by the Sharpe Ratio) of all four comparative portfolios studied (i.e., all stocks, all fixed income, aggressive and conservative portfolios).

Performance of the CBOE DJIA Volatility Index (VXD)
The study also presented several findings on the 9-year performance of the VXD Index:

- Volatility Index Can Reduce Portfolio Volatility. Including a small (10%) allocation to the CBOE DJIA Volatility Index (VXD) could have reduced the volatility of an all-stock portfolio by about 26%, without materially affecting returns.

- Low Correlation and Diversification.The VXD and the DJIA were inversely correlated (-0.62) over the course of this study. The study showed that VXD increased more during market declines (VXD reacted more to stock market declines than to stock market advances), indicating that VXD has potential as a diversification tool.

- Impact on Risk-Adjusted Returns. The inclusion of a small (5%) allocation to the VXD Index boosted risk-adjusted returns for a stock-oriented portfolio, and lowered the risk-adjusted returns for a fixed-income-oriented portfolio.

Michael J. Oyster, FEG lead study consultant, commented in the study: "Volatility as a tool for asset allocation is a concept worth considering because of the potential it has to improve the risk-adjusted returns of diversified portfolios."

Gaining exposure to volatility can be achieved through trading VXD futures contracts listed on the CBOE Futures Exchange (CFE).

The complete FEG study can be found at http://www.cboe.com/BXD.

About the CBOE DJIA BuyWrite Index (BXD)
CBOE created the first BuyWrite Index (BXM) in 2002, and introduced the CBOE DJIA BuyWrite Index (BXD) in April, 2005 to measure the performance of a theoretical portfolio that sells (or "writes") call Options on the Dow (DJX) against a portfolio of the stocks included in the Dow Jones Industrial Average. A "buy-write," also called a covered call, generally is considered to be an investment strategy in which an investor buys a stock or a basket of stocks, and also sells call options that correspond to the stock or basket of stocks. This strategy can be used to enhance portfolio returns and reduce volatility. The BXD has become a standard benchmark for investors and investment professionals seeking a long-term track record of the buy-write strategy. CBOE calculates and disseminates the BXD value at the end of each trading day. Historical values for the BXD are available dating back to October 1997. For more information about BXD, its methodology and use as a portfolio management tool, please visit http://www.cboe.com/bxd.

About the CBOE DJIA Volatility Index (VXD)
CBOE created the first measure of market volatility, the CBOE Volatility Index (VIX) in 1993, and in 2005, introduced the CBOE DJIA Volatility Index (VXD). VXD is designed to reflect investors' consensus view of expected volatility over the next 30 days in the DJIA, and as such, can be used as a benchmark of investor sentiment. VXD tracks the volatility of the widely followed Dow Jones Industrial Average by measuring implied volatility of the near-term DJX options. VXD values can generally be accessed wherever stock or futures quotes are available, and are easily accessed on the CBOE website at http://www.cboe.com/quotes. CBOE calculates and disseminates VXD values throughout the trading day under ticker symbol "VXD," providing a real-time measure of volatility in The Dow.

About Fund Evaluation Group (FEG)
Fund Evaluation Group, LLC (FEG) specializes in providing institutional clients (not-for-profits, corporations, Taft-Hartley, public funds and high net-worth individuals) with a spectrum of objective, investment advisory solutions ranging from full-service, non-discretionary consulting (FEG/Consulting) to a managed, discretionary service (FEG/Advisors). Areas of expertise include investment policy statements, asset allocation, asset-liability studies, portfolio construction, investment manager and custodian searches (traditional and alternative investments, including direct placement and fund-of-funds), fee and commission analysis, performance reporting and trustee education. FEG has been providing investment advisory services since 1988 and currently monitors approximately $32 billion in assets for over 150 full-service clients. FEG is 100% employee owned and is headquartered in Cincinnati, Ohio with offices in Indianapolis, Indiana; Detroit, Michigan; and Rexburg, Idaho.

About CBOE and the CBOE Futures Exchange (CFE)
CFE, launched in March 2004, is a wholly-owned subsidiary of Chicago Board Options Exchange, Incorporated, offering an all-electronic, open access market model, with traders providing liquidity and making markets. CFE currently lists futures on the CBOE DJIA Volatility Index (VXD), CBOE S&P 500 Volatility Index (VIX), CBOE S&P 500 BuyWrite Index (BXM) CBOE S&P 500 Three-Month Variance (VT), CBOE S&P 500 12-month Variance (VA) and the CBOE China Index (CX).

CFE is regulated by the Commodity Futures Trading Commission (CFTC), and its trades are cleared by the triple-A rated Options Clearing Corporation (OCC). More information on CFE and its products, including contract specifications, can be found at: http://www.cboe.com/CFE.

CBOE, the largest U.S. options marketplace and the creator of listed options, is regulated by the SEC. For additional information about the CBOE and its products, access the CBOE web site at http://www.cboe.com.

Lynne Howard-Reed
(312) 786-7123

Gary Compton
(312) 786-7612

CBOE®, CBOEdirect®, CBOE Volatility Index®, Chicago Board Options Exchange®, and VIX® are registered trademarks of Chicago Board Options Exchange, Incorporated. CBOE S&P 500 BuyWrite IndexSM, BXMSM and SPXSM are service marks of Chicago Board Options Exchange, Incorporated. Dow Jonesâ and DJIA® are registered trademarks of Dow Jones & Company, Inc. Dow Jones Industrial AverageSM and Options on the DowSM are service marks of Dow Jones & Company. CBOE's Options on the Dow based on the Dow Jones Industrial Average and financial products based on the CBOE DJIA Volatility Index are not sponsored, endorsed, marketed or promoted by Dow Jones. FEG was compensated by CBOE for the preparation of the new study, which was not intended to be used in connection with the offering for purchase or sale of any security. The methodology of the BXD and VXD Indexes is owned by CBOE and published pursuant to an agreement with Dow Jones. The BXD and VXD Indexes may be covered by one or more patents or pending patent applications. Supporting documentation for claims, comparisons, recommendations, statistics or other technical data is available by calling 1-888-OPTIONS, sending an e-mail to institutional@cboe.com, or by visiting http://www.cboe.com/BXD. This document contains comparisons, assertions, and conclusions regarding the performance of index based on backtesting, i.e., calculations of how the index might have performed in the past if it had existed. Backtested performance information is purely hypothetical and is provided in this document solely for informational purposes. Like many passive indexes, the BXD and VXD 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 BXD Index should discuss with their brokers possible timing and liquidity issues. Past performance is not indicative of 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 will be available in the prospectus/proxy statement when it becomes available.

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