Cboe, CBSX, & CFE Press Releases


CBOE FUTURES EXCHANGE (CFE) TO LAUNCH FUTURES ON THE CBOE S&P 500 BUYWRITE INDEX (BXM) ON MONDAY, OCTOBER 2; Chicago Trading Company Appointed Designated Primary Market Maker, Callan Associates Publishing New Study On BuyWrite Strategy

CHICAGO, September 28, 2006 - The CBOE Futures Exchange (CFE) announced today that on Monday, October 2, 2006, it will launch futures on the CBOE S&P 500 BuyWrite Index (BXM). Chicago Trading Company (CTC) has been appointed the Designated Primary Market Maker (DPM) for the BXM futures.

The CBOE S&P 500 BuyWrite Index 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 offer investors a means to participate in the performance of the BXM, and could be used to gain exposure to the CBOE S&P 500 BuyWrite Index (by going long BXM futures) or to hedge current exposure to the BXM Index (with a short BXM futures position).

Callan Associates, Inc., an investment services consulting firm, was commissioned to publish a new study on the CBOE S&P 500 BuyWrite Index by the CBOE, with an analysis of performance from June 1988 through August 2006. Their study builds upon the earlier studies done by Professor Robert Whaley (Vanderbilt University) and by Ibbotson Associates. The new Callan Associates study contains several key findings, including:

- BXM generated superior risk-adjusted returns over the last 18 years, generating a return comparable to that of the S&P 500 with approximately two-thirds of the risk. (The compound annual return of the BXM was 11.77% compared to 11.67 percent for the S&P 500 and BXM returns were generated with a standard deviation of 9.29%, two-thirds of the 13.89% volatility of the S&P 500.)

- The risk-adjusted performance, as measured by the monthly Stutzer Index over the 18-year period, was 0.20 for the BXM vs. 0.15 for the S&P 500. A comparison using the monthly Sharpe Ratio yielded similar results (0.22 vs. 0.16, respectively), confirming the relative efficiency of the BXM over the 219-month study period.

- The BXM underperformed the S&P 500 during most rising equity markets and consistently outperformed the S&P 500 in all periods of declining equity markets, demonstrating the return cushion provided by income from writing the calls.

- The BXM generates a return pattern different from that of the S&P 500, offering a source of potential diversification.The addition of the BXM to a diversified investor portfolio would have generated significant improvement in risk-adjusted performance over the past 18 years.

Additional information about BXM and the new Callan Associates study may be found at: http://www.cboe.com/BXM.

BXM futures will be cash-settled and will trade on the March quarterly cycle, with expirations in November and December of 2006, and January, March, June, and September of 2007. The futures contract will be 100 times the value of the BXM, which is calculated and disseminated by the CBOE. CFE is waiving exchange transaction fees for BXM futures through November 31, 2006.

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 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.

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. DJIA and Dow Jones Industrial Average are trademarks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by CBOE. 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 and CFE pursuant to a License Agreement. 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.

Nothing in the paper by Callan Associates, Inc. ("paper") is intended to be giving of investment advice to any single investor or group of investors and no investor should rely upon or make any investment decision based upon the contents of the paper. The paper was prepared at the request of Chicago Board Options Exchange solely to describe the basic investment principles of the CBOE S&P 500 BuyWrite Index and was not intended to be used in connection with the offering for purchase or sale of any security. Callan Associates, Inc. makes no representation as to the appropriateness of these strategies for any investor. Before adopting any part of a Buy-Write investment strategy investors should consult with a recognized investment advisor who is familiar with their particular financial circumstances. Callan Associates, Inc., assumes no responsibility for any losses investors might suffer by reason of adopting such an investment strategy.

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