The CBOE S&P 500 2% OTM BuyWrite Index (BXY) uses the same methodology as the widely accepted CBOE S&P 500 BuyWrite Index (BXM) but the BXY Index is calculated using out-of-the-money S&P 500 Index (SPX) call options, rather than at-the-money SPX call options.
The BXY strategy diversifies the buy-write opportunities currently provided by the BXM. The BXY Index yields lower monthly premiums in return for a greater participation in the upside moves of the S&P 500.
A "buy-write," also called a covered-call strategy, generally is considered to be an investment strategy in which an investor buys a stock or a basket of stocks, and also sells ("writes") call options that correspond to the stock or basket of stocks. This strategy can be used to enhance portfolio returns and reduce volatility.
The buy-write strategy gained increased acceptance following the publication of a 2004 study by Ibbotson Associates, a leading research firm specializing in asset allocation, that concluded that the CBOE BXM had the best risk-adjusted performance of the major domestic and international equity-based indexes over the previous 16 years. Investors recently have allocated more than $20 billion in at least 40 buy-write funds.
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