Cboe, CBSX, & CFE Press Releases



Bürgenstock and Chicago, September 08, 2006- The CBOE Futures Exchange (CFE) announced today that it is taking another step in index innovation with plans to launch futures on the CBOE S&P 500 BuyWrite Index, "BXM," on October 2, 2006, pending regulatory approval.

"The BXM is the gold-standard measure of the performance of one of the most popular options strategies. BXM futures offer a direct, cost-efficient way to participate in the performance of the CBOE BuyWrite strategy, enabling investors to enhance portfolio returns while lowering volatility, and providing another essential means for managing risk," said CFE Managing Director Patrick Fay. "BXM is a great tool to measure a hypothetical buy-write strategy, but BXM futures are a vehicle that lets you actually execute the strategy."

The CBOE S&P 500 BuyWrite Index (BXM) is a broad-based benchmark index that measures the performance of a hypothetical portfolio that sells S&P 500 Index (SPX) call options, generally on the third Friday of each month, against a long portfolio of stocks in the S&P 500 Index.

BXM futures will be cash-settled and will trade on the March expiration cycle, with initial expirations in November and December of 2006, and January, March, June, and September of 2007. The contract will be 100 times the value of the BXM, which is calculated and disseminated by the CBOE.

Key points about the BXM Index (http://www.cboe.com/BXM) and buy-write strategies include:

- Introduction. The BXM, the first benchmark measure of the performance of an options-based strategy, was created by CBOE in 2002. CBOE commissioned Professor Robert Whaley, now with Vanderbilt University, to compile and analyze relevant data from 1988 through 2001 to develop the BXM. Historical price data for BXM is available back to 1988, when S&P first began reporting daily cash dividends for the S&P 500 index.
- Consultant's Study. In a 2004 study, Ibbotson Associates found that the BXM had the best risk-adjusted performance of the major U.S. and international equity-based indexes over the 16-year period studied, and that the strategy enhances the risk-return tradeoff when added to a portfolio.
- New Investments. In the past two years, investors have allocated more than $20 billion to more than 40 new investment products that utilize buy-write strategies. Many investors appreciated the fact that the hypothetical BXM Index garnered call options premiums at an average rate of about 1.6% per month over the past 18 years.
- Awards. The BXM Index was awarded the "Innovative Index of the Year" award at the Super Bowl of Indexing Conference, and the creation of the BXM Index led to CBOE receiving the 2006 "Exchange of the Year, North America" award by Structured Products magazine.
- Performance. In the period from June 1988 through July 2006, the BXM Index had slightly higher annualized returns than the S&P 500 Index (11.8% vs. 11.5%) and the BXM had significantly less volatility than the S&P 500 Index (9.3% vs. 13. 9% standard deviation).

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 Volatility Index (VIX), CBOE S&P 500 Three-Month Variance, CBOE S&P 500 12-month Variance, CBOE DJIA Volatility Index, CBOE China Index, and Gas At the Pump.

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.

Lynne Howard-Reed
(312) 786-7123

Gary Compton
(312) 786-7612

CBOE, Chicago Board Options Exchange, CBOEdirect, CBOE Volatility Index, and VIX are registered trademarks of Chicago Board Options Exchange, Incorporated (CBOE).SPXSM and BXMSM are service marks of Chicago Board Options Exchange, Incorporated (CBOE). Gas At The Pump is a registered trademark of CBOE Futures Exchange, LLC. 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. The methodology of the CBOE S&P 500 BuyWrite Index is owned by CBOE and may be covered by one or more patents or pending patent applications. 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.

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