The Cboe S&P 500 Dividend Aristocrat Target Income Index (the "SPAI Index") is part of the family of Target Outcome Indices. The Index is a benchmark index designed to track the performance of a hypothetical buy-write strategy on constituents of the S&P 500 Dividend Aristocrat Index1. The S&P 500 Dividend Aristocrat Index, constructed and maintained by S&P Dow Jones Indices LLC, targets companies that are currently members of the S&P 500® Index, have increased dividend payments each year for at least 25 years, and meet certain market capitalization and liquidity requirements. The SPAI Index was launched on August 15, 2017.
The SPAI Index is designed with the primary goal of generating an annualized level of income that is approximately 3.5% over the annual dividend yield of the S&P 500® Index and a secondary goal of generating price returns that are proportional to the price appreciation of the S&P 500 Index. The SPAI Index investment strategy includes (1) buying the stocks contained in the S&P 500 Dividend Aristocrat Index, and (2) partially “writing” (or selling) weekly “covered” call options on each stock, generally on the last trading day of each week. The number of call options overwritten per unit of stock exposure is varied periodically with the goal of generating a total yield from dividends and call option premiums that is 3.5% per annum higher than the yield from dividends of the S&P 500 Index. The percentage of each stock that is overwritten with call options will by design be always less than 20%.