Cboe S&P 500 Iron Butterfly Index (BFLY)
The Cboe S&P 500 Iron Butterfly IndexSM (BFLY) is inspired by the butterfly option strategy. The objective of a butterfly option spread is to mine "near-the-money" option volatility premia with limited risk. In the same vein, the BFLY index tracks the value of a hypothetical portfolio that overlays a short SPX at-the-money straddle and long 5% out-of-the-money SPX call and put. To guarantee solvency, the Treasury bills cover ten times the maximum loss of the short butterfly spread.
The BFLY portfolio is calculated once per day, and it is rebalanced monthly, usually at 11 am ET every third Friday after the options in the butterfly spread expire. A new SPX butterfly spread is then sold. hypothetical portfolio that overlays a butterfly spread of SPX options over one-month Treasury bills .