Introduction to Social Media Indexes
The Cboe Options Exchange (Cboe) and Social Market Analytics (SMA) are partnering in the development of a suite of innovative indexes based on SMA data, the Cboe-SMA Index Suite. SMA applies its patented account certification algorithm to extract predictive signals from Twitter traffic by passing tweets through their proprietary NLP architecture to generate different S-Factors that reflect investors' sentiment about stocks. Cboe SMA Indexes are designed to provide unique measures of the premia generated by a new "social media momentum" factor. Each index in the Cboe-SMA Index Suite will track the performance of a portfolio of stocks or options referenced to a defined universe of stocks. Each portfolio will be rebalanced frequently, e.g. on a daily or weekly basis, to maximize the value of SMA signals.
Cboe-SMA Large-Cap Index (SMLC Index)
The Cboe-SMA Index tracks the return of a hypothetical portfolio of 25 stocks with high SMA S-Scores that is rebalanced on a daily basis. The stocks are selected from the Cboe Large-Cap Universe. The Cboe Large-Cap Universe is comprised of stocks that (a) are in the top 15% capitalization tranche of stocks that are the underlying for options listed on the Cboe (approximately 3000) and (b) whose market capitalization is greater than or equal to $10 billion. The Cboe Large-Cap Universe is reconstituted quarterly on the third Friday of the month. At 8:10 am CT, Cboe determines which 25 stocks in the Cboe Large-Cap Universe have the highest SMA S-Scores. At 8:30 am CT, Cboe constitutes an equally-weighted portfolio of the 25 stocks. The portfolio is held until 3:00 pm CT, and when it is liquidated. The proceeds of the hypothetical sale of the stock portfolio are held in cash until the next business day, when a new portfolio is assembled.