CBOE S&P 500 95-110 Collar Index (CLL) www.cboe.com/CLL


In September 2008 CBOE launched the CBOE S&P 500 95-10 Collar Index (CLLSM), an index designed to provide investors with insights as to how one might protect an investment in S&P 500 stocks against steep market declines.

This strategy accepts a ceiling or cap on S&P 500 gains in return for a floor on S&P 500 losses. The passive collar strategy reflected by the index entails:

  • Holding the stocks in the S&P 500 index;
  • Buying three-month S&P 500 (SPX) put options to protect this S&P 500 portfolio from market decreases; and
  • Selling one-month S&P 500 (SPX) call options to help finance the cost of the put options.

The term "95-110" is used to describe the CLL Index because (1) the three-month put options are purchased at a strike price that is about 95 percent of the value of the S&P 500 Index at the time of the purchase (in other words, the puts are about five percent out-of-the-money), and (2) the one-month call options are written at a strike price that is about 110 percent of the value of the S&P 500 Index at the time of the sale (in other words, the calls are about ten percent out-of-the-money). The starting and base date CBOE S&P 500 95-10 Collar Index (CLL) is June 30, 1986, at which it was priced at 100. Daily closing values for the CLL Index should be available from major price quote vendors and at the link below.

The CLL Index is CBOE's first benchmark index to incorporate the downside floor protection of protective puts on the S&P 500 Index, financed by the sale of SPX call options, and will be a valuable resource for investors who want to explore ways to manage their portfolio risk in bear markets.

Study on Index Options Writing by Asset Consulting Group

In February 2012 the Asset Consulting Group published a six-page paper -- "An Analysis of Index Option Writing for Liquid Enhanced Risk-Adjusted Returns". Key findings of the paper include:

  • Total Growth. Total growth for indexes since mid-1986 was 1153% for PUT Index, 830% for BXM Index, 807% for S&P 500® Index, and 368% for CLL Index (Exhibits 2 and 6).
  • Lower Volatility. The PUT, BXM, and CLL indices all had volatility that was about 30 percent lower than the volatility of the S&P 500 Index (Exhibit 4).
  • Left-tail Risk. Over the past 25 years, the worst monthly loss for the S&P 500 Index was a decline of 21.5 percent, compared to a relatively modest 8.6-percent monthly decline for the CLL Index (Exhibit 8e).
  • Risk-adjusted Returns. One measure of risk-adjusted returns, the Sortino Ratio, was 0.90 for the PUT Index, 0.75 for BXY, 0.71 for BXM, 0.50 for S&P 500, and 0.31 for CLL Index (Exhibits 10 and 11). Please note that all the indexes had negative skewness.
  • Monthly Premium Income. The average for the gross monthly premiums collected by the BXM Index was 1.8 percent. The index options usually were richly priced (Exhibits 12 and 13).

For more information, please see the six-page paper and press release.

Paper on Hedging and Tail Risk Management

Key Tools for Hedging and Tail Risk Management is a paper by Asset Consulting Group (February 2012)

Key highlights from the paper include:

  • Tail Risk Over 25 Years: Since mid-1986 the worst monthly declines for select indexes include: down 28.2% for the S&P GSCI Index, down 21.5% for S&P 500, down 20.2% for MSCI EAFE, and a decline of only 8.6% for the CLL Index (Exhibit B).
  • Risk and Diversification in 2008: Changes for indexes in 2008 - S&P 500 down 37.0%; two indexes with options and stocks - CLL Index down 23.6% and VXTH Index down 19.3 (Exhibit A).
  • Lower Volatility: The CLL has incurred about 70% of the volatility of the S&P 500 over the last 26 years. Select portfolios with the VXTH had less volatility than the S&P 500 over the last 70 months (Exhibits C, F, and O).

More papers and benchmark index information are available at http://www.cboe.com/benchmarks

Updated Price Charts

The information in these materials is provided solely for general education and information purposes and therefore should not be considered complete, precise, or current. Many of the matters discussed are subject to detailed rules, regulations, and statutory provisions which should be referred to for additional detail and are subject to changes that may not be reflected in these materials. No statement within this material should be construed as a recommendation to buy or sell a security or to provide investment advice. The CBOE S&P 500 95-10 Collar Index (CLLSM),CBOE S&P 500 BuyWrite Index (BXMSM) and other CBOE buywrite indexes (the "Indexes") are designed to represent proposed hypothetical buy-write strategies. Like many passive benchmarks, the Indexes do not take into account significant factors such as transaction costs and taxes. Transaction costs and taxes for a buy-write strategy could be significantly higher than transaction costs for a passive strategy of buying-and-holding stocks. Investors attempting to replicate the Indexes should discuss with their brokers possible timing and liquidity issues. Past performance does not guarantee future results. These materials contain comparisons, assertions, and conclusions regarding the performance of indexes based on backtesting, i.e., calculations of how the indexes might have performed in the past if they had existed. The methodology of the Indexes is owned by Chicago Board Options Exchange, Incorporated (CBOE) may be covered by one or more patents or pending patent applications. 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. CBOE® and Chicago Board Options Exchange®; are registered trademarks and BXM, BXD, BXN and BXY are servicemarks of CBOE. Copyright © 2008 Chicago Board Options Exchange, Incorporated. All Rights Reserved.

  VIX Snapshot

*Third Party Advertisement