Cboe S&P 500 Range-Bound Premium Income Index Series

Introduction

The Cboe S&P 500 Range-Bound Premium Income Index (the "Index") is part of the family of Target Outcome Indices. The Index is designed to provide a target level of monthly premium income that exhibits low correlations to monthly return from US domestic fixed income markets and directionally neutral to monthly returns of the US domestic stock market.

The Index measures the performance of a portfolio of short term T-Bills and exchange traded Flexible Exchange® Options ("FLEX® Options") that are based on the S&P 500® Index. The Index is designed to track the returns of an investment that over a period of approximately one month seeks to provide a target level of premium income from sales and purchase of options while minimizing the risk of loss from the options positions.

  • Cboe S&P 500 Range-Bound Premium Income Index (SPRISM)

Target Outcome Returns

The Index is part of the family of Target Outcome Indices. Many investments target speculative returns, with uncertain levels of risk, over an uncertain period of time. While opportunistic, this approach to investing brings a high degree of uncertainty. Target Outcome Indexes encourage targeting a specific defined return or "payoff", with an allowance for a specific defined risk, at a specific point in time in the future.

Range-Bound Option Strategy

A Range-Bound Option Strategy (the "Strategy") is a strategy that is generally used in a range-bound market environment. The Strategy seeks to provide a source of income returns that has low correlation to the returns from the US domestic fixed income markets and is neutral to the returns from the US domestic equity markets.

The Strategy sets the upper and lower bounds for the price return of the S&P 500 Index each month (the "Range") to attempt to meet two objectives:

  • Receive a target level of premium income through sale and purchase of FLEX Options.
  • Reduce the possibility of loss from settlement of the options due to the price return of S&P 500® Index being outside the Range at month's end.

Following is a visual example of the outcome that the Range-Bound Option strategy targets:

Price and Performance Charts

SPRI:

Range Levels

Following are the Upper and Lower Bounds for the Rangeover the last twelve years and the performance of the S&P 500 Index in each of those months.


Index Constituents

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