Introduction to CBOE S&P 500^® VARB-XM^TM Strategy Benchmark

The CBOE S&P 500^® VARB-X^TM ("Volatility ARBitrage") Strategy Benchmark is CBOE's most recent effort to highlight new and interesting trading strategies that use options and futures. The new index tracks the performance of a hypothetical volatility arbitrage trading strategy designed to capitalize on the historical difference between S&P 500 Index (SPX) option implied volatility and the realized, or historical, volatility of the S&P 500 Index.

The VARB-X benchmark was set to 100.00 as of June 21, 2004, and at the end of February 2007 was at a level of 159.68. Since its inception, VARB-X has reflected an annual rate of return of 19.0% with a standard deviation of 6.4%. By comparison, over the same period, the annual rate of return for the S&P 500 was 8.3% with standard deviation of 10.3%. The Sharpe Ratio, a standardized measure of return per unit of risk, for the VARB-X benchmark was 2.37-- five times greater than the Sharpe Ratio for the S&P 500 for the same time period, reflecting a more favorable risk-reward ratio.

CBOE will calculate and disseminate the VARB-X benchmark value once per day, at the close of trading, under the ticker symbol VTY. VTY values will be available on the CBOE website at www.cboe.com/Quotes and from options price quote vendors. A detailed description of the strategy, the concept behind the Index, methodology and historical data is available in our CBOE S&P 500 VARB-X Strategy Benchmark Paper.

Spreadsheet with Daily Price History of the VTY Index