CBOE NASDAQ-100 BuyWrite Index (BXN) www.cboe.com/BXN


BXN  

The CBOE NASDAQ-100 BuyWrite Index (BXN) is a benchmark index that measures the performance of a theoretical portfolio that owns a portfolio of the stocks included in the NASDAQ-100 Index®, and "writes" (or sells) NASDAQ-100 Index (NDX) covered call options.

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 writes (or sells) call options that correspond to the stock or basket of stocks. This strategy can be used in an attempt to enhance a portfolio's risk-adjusted returns and reduce its volatility.

Links to More Information

More Discussion of Buy-Write Strategies and the BXN Index

Buy-Write strategies provide option premium income that can help cushion downside moves in an equity portfolio, but Buy-Writes often under perform stocks in rising markets. Thus, some Buy-Write strategies significantly outperformed stocks in 2000 - 2002 when the year-end price for many stock indexes fell three years in a row, but Buy-Writes tended to underperform stocks in the late 1990s bull market. Buy-Write strategies have an added attraction to some investors in that Buy-Writes can help lessen the overall volatility in many portfolios.

In 2002 the Chicago Board Options Exchange (CBOE) commissioned Professor Robert Whaley to develop the methodology for a benchmark index designed to reflect buy-write performance. In 2004 the Ibbotson Associates consulting firm did a case study on buy-write strategies.

The CBOE NASDAQ-100 BuyWrite Index (BXN) is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the NASDAQ-100. The BXN is a passive total return index based on (1) buying a NASDAQ-100 stock index portfolio, and (2) "writing" (or selling) the near-term NASDAQ-100 (NDX) Index "covered" call option, generally on the third Friday of each month. The NDX call written will have about one month remaining to expiration, with an exercise price just above the prevailing index level (i.e., slightly out of the money). The NDX call is held until expiration and cash settled, at which time a new one-month, near-the-money call is written. Data on daily BXN prices is available from December 30, 1994, to the present from options price quote vendors and at www.cboe.com/BXN (see the link to spreadsheet above).

Testimonial

"Our firm uses the NASDAQ-100 (NDX) index options on behalf of institutional funds and private clients. We welcome innovations such as the CBOE NASDAQ-100 Buy-Write Index (BXN) that help investors to better understand and measure the benefits of option hedged equity portfolios".
Walter Sall

Former Chairman and Chief Executive Officer
Gateway Investment Advisers, L.P.

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The BXM, BXD, BXN, BXY, CLL and PUT indices (the "Indexes") are designed to represent proposed hypothetical options strategies. The actual performance of investment vehicles such as mutual funds or managed accounts can have significant differences from the performance of the Indexes. Investors attempting to replicate the Indexes should discuss with their advisors possible timing and liquidity issues. Like many passive benchmarks, the Indexes do not take into account significant factors such as transaction costs and taxes. Transaction costs and taxes for strategies such as the Indexes could be significantly higher than transaction costs for a passive strategy of buying-and-holding stocks. Investors should consult their tax advisor as to how taxes affect the outcome of contemplated options transactions. Past performance does not guarantee future results. This web page contains index performance data based on back-testing, i.e., calculations of how the index might have performed prior to launch. Backtested performance information is purely hypothetical and is provided in this web page solely for informational purposes. Back-tested performance does not represent actual performance and should not be interpreted as an indication of actual performance. It is not possible to invest directly in an index. CBOE calculates and disseminates the Indexes. Supporting documentation for any claims, comparisons, statistics or other technical data is available from CBOE upon request. The methodologies of the Indexes are the property of Chicago Board Options Exchange, Incorporated (CBOE).
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