Performance Analysis of CBOE S&P 500 

Options‐Selling Indices

Keith Black, Ph.D., CAIA, CFA

Managing Director of CAIA (Chartered Alternative Investment Analyst Association)

Edward Szado, Ph.D., CFA

Assistant Professor of Finance, Providence College
Director of Research, INGARM (Institute for Global Asset and Risk Management)

www.INGARM.org

January 2016

2/10/2016

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 1
 Introduction
Executive Summary
• An options-selling fund may sell calls, puts,
covered calls, or sell cash-secured puts at a
variety of levels of moneyness and initial time to
expiration.
• The choice of moneyness reflects a tradeoff
between the amount of premium collected versus
the likelihood that the short options will expire in-
the-money. The further the option is out-of-the-
money, the more likely that the premium collected
from writing the option will represent the increase
in net income, and not be mitigated by the option
expiring in-the-money. However, the further the
option is out-of-the-money, the less premium will
be collected.
• In general, option premiums tend to decay more
quickly as they approach expiration. Thus the
choice of initial time to expiration can also
significantly impact performance of options-selling
strategies.
• The Chicago Board Options Exchange®
(CBOE®), which sponsored this study, lists
several benchmark indices (including the BXMSM,
BXMDSM, BFLYSM, CNDRSM, CMBOSM and PUTSM
indexes) that follow options-selling strategies.
Please email comments to eszado@providence.edu, kblack@caia.org or institutional@cboe.com.
“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
Summary of Results
The study provides an analysis of 29 ½ years of performance (from mid-
1986 through the end of 2015) for six Options-selling indices and for
stock, bond and commodity indices. Key findings of the new study
include:
• HIGHER RISK-ADJUSTED RETURNS. The Options-selling
indices had generally similar returns as the S&P 500® Index with
much lower volatility and lower maximum drawdowns. The
Options-selling indices had higher risk-adjusted returns, as
measured by the Sharpe Ratio, Sortino Ratio, and Stutzer Index.
• IMPROVED RETURN DISTRIBUTIONS. The Options-selling
indices exhibited less tail risk with lower likelihood of large losses
and lower likelihood of large gains than the S&P 500.
• LOWER BETAS AND POSITIVE ALPHAS. Options-selling indices
tend to have relatively low betas ranging from 0.13 to 0.82 and
have positive alphas.
• STRONG PERFORMANCE FOR BENCHMARKS THAT SELL
SPXSM INDEX OPTIONS. Both the CBOE S&P 500 PutWrite Index
(PUTSM) and the CBOE S&P 500 30-Delta BuyWrite Index
(BXMDSM) had higher returns and lower volatility than the S&P
500 Index. A key source of strong risk-adjusted returns has been
the fact that the index options usually have been richly priced.
• HIGHER GROSS PREMIUMS. Over a period of more than 8
years, the index that sells SPX put options once a week (WPUT
Index) generated gross monthly premiums that in aggregate were
about 8% higher for a rolling six-month period than the index that
sells SPX put options once a month (PUT Index).
• HIGH NOTIONAL VALUE. The average daily notional value for
volume on the S&P 500 options rose to more than $190 billion in
2015.
2
 Co-authors of the Study

Keith Black, Ph.D., CAIA, CFA

Keith Black has over twenty years of financial market experience, serving approximately half of that time as an academic and half as a
trader and consultant to institutional investors. He currently serves as Managing Director of Curriculum and Exams for the CAIA
Association. During his most recent role at Ennis Knupp + Associates, Keith advised foundations, endowments and pension funds on
their asset allocation and manager selection strategies in hedge funds, commodities and managed futures. Prior experience includes
commodities derivatives trading at First Chicago Capital Markets, stock options research and CBOE market-making for Hull Trading
Company, and building quantitative stock selection models for mutual funds and hedge funds for Chicago Investment Analytics. Dr.
Black previously served as an assistant professor and senior lecturer at the Illinois Institute of Technology's Stuart school, where he
taught courses in both traditional and alternative investments.

He contributes regularly to The CFA Digest, and has published in a number of journals, including The Journal of Trading and The Journal
of Alternative Investments. He is the author of the book "Managing a Hedge Fund," as well as a contributor to the second and third
editions of the CAIA Level I and Level II textbooks. Dr. Black was named to Institutional Investor magazine's list of "Rising Stars of
Hedge Funds" in 2010.

Dr. Black earned a BA from Whittier College, an MBA from Carnegie Mellon University, and a PhD from the Illinois Institute of
Technology. He has earned the Chartered Financial Analyst (CFA) designation and was a member of the inaugural class of the
Chartered Alternative Investment Analyst (CAIA) candidates.

Edward Szado, Ph.D., CFA

Edward Szado is Assistant Professor of Finance, Providence College. He is also the Director of Research at the Institute for Global
Asset and Risk Management and received his Ph.D. in Finance from the Isenberg School of Management, University of Massachusetts,
Amherst. He has taught Risk Management at the Boston University School of Management, Derivatives at Clark University and a range
of finance courses at the University of Massachusetts Amherst. He is a former options trader and his experience includes product
development in the areas of volatility based investments and structured investment products. He is also a Chartered Financial Analyst
and has consulted for the Options Industry Council, the Chicago Board Options Exchange, the Chartered Alternative Investment Analyst
Association and the Commodity Futures Trading Commission.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 3

CBOE S&P 500 Iron
Butterfly Index (BFLY)
CBOE S&P 500 Buy Write
Index (BXM)
CBOE S&P 500 30-Delta
Buy-Write Index (BXMD)
CBOE S&P 500 Covered
Combo Index (CMBO)
CBOE S&P 500 Iron Condor
Index (CNDR)
CBOE S&P 500 PutWrite
Index (PUT)
All six indices above sell SPX options and have had less volatility than the S&P 500 Index over the past 29 years.
“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
Strategy Descriptions
Strategy Year Introduced Earliest Historical Price
Sell at-the-money call and put options on 2015 June 30, 1986
S&P 500 index and buy 5% out-of-the-
money call and put options
Purchase stocks in the S&P 500 index, and 2002 June 30, 1986
each month sell at-the-money index call
options
Purchase stocks in the S&P 500 index, and 2015 June 30, 1986
each month sell a 30-delta index call option
Each month, a 2% out-of-the-money call 2015 June 30, 1986
option and an at-the-money put option is
sold. The calls are covered by a long
position in the S&P 500 index and the puts
are covered by one-month Treasury bills
Each month, 20-delta put and call options on 2015 June 30, 1986
the S&P 500 index are sold and 5-delta put
and call options are purchased
Purchase Treasury bills and sell cash- 2007 June 30, 1986
secured put options on the S&P 500 index
4
 P&L Diagrams and Histograms of Returns
BXM & BXMD

The SPX call options sold generate premiums that can provide a cushion in months with stock market drawdowns.
5
“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
 P&L Diagrams and Histograms of Returns
CNDR & BFLY

The O‐T‐M puts purchased help lessen the risk of big monthly losses.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 6
 P&L Diagrams and Histograms of Returns
CMBO & PUT

The histograms provided on pages 5 through 7 reflect the observed return distributions of the Options-selling indices and the S&P 500 over
the period of study. In general, the histograms reflect a lower occurrence of large losses or large gains for the Options-selling indices than for
the S&P 500.
Source: Bloomberg. 7
“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
 Net Returns in Recent Years
2007 2008 2009 2010 2011 2012 2013 2014 2015
6.2% -31.3% 32.1% 11.2% 7.3% 11.0% 19.1% 6.2% 4.0% CBOE S&P 500 30-Delta BuyWrite Index (BXMD)
9.5% -26.8% 31.5% 9.0% 6.2% 8.1% 12.3% 6.4% 6.4% CBOE S&P 500 PutWrite Index (PUT)
5.5% -37.0% 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% 1.4% S&P 500

Exhibit 1: This exhibit provides the cumulative growth of $100 invested in Options-selling indices and benchmark indices
over the period of study. The Options-selling indices provided similar cumulative return over the period to an S&P 500
investment. All index performance reflected in the study are pre-tax and assume reinvestment of dividends.
Source for Six Histograms on 3 pages: Bloomberg.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 8
Exhibit 2: This exhibit provides annualized compound total returns for Options-selling and benchmark indices. Annualized
compound total returns represent the total cumulative growth over the period converted into an annual compounded return.
Two of the Options-selling indices compare favorably to the S&P 500 over the period of study from a total return perspective.
Sources: Bloomberg

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 9
Exhibit 3: Five of the Options-selling indices had a lower standard deviation than the T-bond, stock and commodity indices.
Source: Bloomberg.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 10
Exhibit 4: Maximum Drawdown is an indicator of the worst loss an investment exhibited in a historical period.
Options-selling Indices experienced lower drawdown risk than the S&P 500 Index.
Source: Bloomberg.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 11
Exhibit 5: Options-selling Indices experienced smaller losses in 2008 than the S&P 500 Index.
Source: Bloomberg.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 12
 Exhibit 6: Summary Statistics
Options-Selling and Benchmark Indices
(July 1986 to December 2015)
July 1986 to S&P 500 CBOE S&P CBOE S&P CBOE CBOE CBOE CBOE MSCI S&P Citigroup 1 Month
December 2015 500 Iron 500 S&P 500 S&P 500 S&P S&P 500 EAFE GSCI 30-yr Tbill
Butterfly BuyWrite 30-Delta Covered 500Iron PutWrite US$ Treasury Yield
Index Index (BXM) BuyWrite Combo Condor Index Bond
(BFLY) (BXMD) Index Index (PUT)
(CMBO) (CNDR)
Annualized Return 9.85% 5.96% 8.88% 10.66% 9.55% 7.09% 10.13% 6.28% 3.52% 7.05% 3.27%
Average Monthly Return 0.88% 0.53% 0.76% 0.92% 0.82% 0.60% 0.85% 0.64% 0.47% 0.63% 0.27%
Standard Deviation 15.26% 10.77% 10.85% 13.18% 11.17% 7.23% 10.16% 17.48% 20.69% 12.26% 0.70%
Auto-correlation 0.04 0.03 0.09 0.04 0.08 0.08 0.13 0.08 0.18 0.05 0.99
Maximum Drawdown -50.95% -33.75% -35.81% -42.73% -38.13% -13.66% -32.66% -56.68% -79.44% -25.96%
2008 -37.00% -5.34% -28.65% -31.25% -30.21% -3.99% -26.77% -43.38% -46.49% 41.27% 1.35%
Skew -0.79 0.02 -1.54 -1.09 -1.51 -2.11 -2.10 -0.40 -0.20 0.29 0.05
Kurtosis 2.45 -0.39 6.23 3.74 5.76 6.08 9.75 0.93 1.97 2.79 -1.15
Jensen's Annual Alpha 0.00% 2.20% 1.25% 1.74% 1.64% 2.66% 2.88% -1.50% 0.73% 4.88% -0.01%
Leland's Annual Alpha 0.00% 2.00% 1.03% 1.62% 1.44% 2.37% 2.61% -1.57% 0.43% 4.95% -0.01%
Beta 1.00 0.13 0.63 0.82 0.67 0.17 0.56 0.80 0.23 -0.07 0.00
Leland's Beta 1.00 0.16 0.66 0.84 0.69 0.21 0.59 0.81 0.27 -0.08 0.00
Treynor Ratio 0.07 0.25 0.09 0.10 0.10 0.23 0.13 0.06 0.11 -0.61 0.00
Annual Sharpe Ratio 0.48 0.29 0.55 0.59 0.59 0.54 0.69 0.25 0.12 0.35 0.00
Sortino Ratio 0.63 0.41 0.68 0.76 0.73 0.63 0.83 0.34 0.16 0.51
Stutzer Index 0.48 0.29 0.53 0.58 0.57 0.52 0.65 0.25 0.12 0.36 0.00
Correlation with S&P 500 1.00 0.18 0.89 0.95 0.91 0.36 0.84 0.70 0.17 -0.09 0.03
Semi standard deviation* 11.67% 7.62% 8.76% 10.30% 9.02% 6.23% 8.45% 12.92% 14.93% 8.47% 0.50%
M2 10.62% 7.69% 11.55% 12.30% 12.20% 11.48% 13.73% 7.09% 4.99% 8.64% 3.22%
*Below mean

Exhibit 6: The return and risk of Options-selling indices generally compare favorably to long-only equity indices both from the
perspective of absolute returns and risk-adjusted returns. The Stutzer Index and Sortino ratio compensate for non-Normal return
distributions.
Source: Bloomberg.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 13
 Exhibit 7: Return-to-Risk Ratios – Options-Selling and Benchmark
Indices
(July 1986 to December 2015)

Exhibit 7: Most Options-selling indices had higher risk-adjusted returns than the stock and commodity benchmark indices. The Sharpe
ratio assumes normally distributed returns and uses total deviation in returns as the measure of risk. The Sortino ratio considers
downside risk, while the Stutzer Index accounts for skewness and kurtosis in the risk measures. All measures are annualized. The PUT
Index had the highest values for all four ratios in the chart above.
Sources: Morningstar and Bloomberg.
“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
 Exhibit 8: Betas and Alphas Options-Selling and Benchmark Indices
(July 1986 to December 2015)

Exhibit 8: Beta provides a measure of the index sensitivity to market (S&P 500) returns. Options-selling indices tend to have relatively low exposure to
market movements, with betas ranging from 0.13 to 0.82. Jensen’s Alpha and Leland’s Alpha are measures of risk-adjusted performance relative to the
S&P 500. Leland’s alpha accounts for skewness and kurtosis in the return distributions, while Jensen’s alpha assumes normally distributed returns.
Options-selling indices had higher risk-adjusted returns than the S&P 500 Index by both measures.
Sources: Morningstar and Bloomberg.
“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 15
 Exhibit 9: Risk-Return Tradeoff Options-Selling and Benchmark Indices
(July 1986 to December 2015)

Exhibit 9: This exhibit provides the average return-to-risk tradeoff for the Options-selling indices as well as the benchmark indices; a 60/40 equity
and bond portfolio; and a portfolio made up of 80% of the 60/40 portfolio and 20% of an equally weighted exposure to the Options-selling indices.
The best tradeoff can be found in the upper left portion of the diagram. Adding 20% Options-selling index exposure to a traditional portfolio
improves its return-to-risk tradeoff, reducing risk while leaving returns virtually unchanged.
Source: Bloomberg.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 16
 Exhibit 10: Rolling 12 Month Standard Deviation and Returns
Options-Selling and Benchmark Indices
(July 1986 to December 2015)

Exhibit 10: This exhibit provides 12-month rolling standard deviations and returns for Options-selling and benchmark indices. While the rolling
returns of the Options-selling indices are generally quite similar to those of the S&P 500 (particularly for the BXM and PUT), the standard
deviations of the Options-selling indices are typically significantly lower than those of the S&P 500.
Sources: Bloomberg and CBOE.

“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
17
 Exhibit 11: Annual Returns - Options-Selling and Benchmark Indices
CBOE S&P 500 CBOE S&P 500 Citigroup
CBOE S&P 500 CBOE S&P CBOE S&P 500 CBOE S&P 500
30-Delta Covered MSCI EAFE 30 Yr
Year S&P 500 Iron Butterfly 500 BuyWrite Iron Condor PutWrite Index S&P GSCI
BuyWrite Index Combo Index US$ Treasury
Index (BFLY) Index (BXM) Index (CNDR) (PUT)
(BXMD) (CMBO) Bond

1987 5.3% -4.6% -3.0% -0.2% -0.7% -4.0% -2.6% 24.6% 23.8% -8.0%
1988 16.6% 9.4% 21.0% 22.8% 22.1% 16.4% 19.7% 28.3% 27.9% 8.1%
1989 31.7% 15.0% 25.0% 32.7% 27.9% 20.3% 24.6% 10.5% 38.3% 20.3%
1990 -3.1% 8.9% 4.0% 3.9% 5.8% 9.7% 8.9% -23.4% 29.1% 4.8%
1991 30.5% 33.5% 24.4% 23.5% 24.0% 17.0% 21.3% 12.1% -6.1% 17.3%
1992 7.6% 13.8% 11.5% 10.8% 12.4% 13.4% 13.8% -12.2% 4.4% 6.8%
1993 10.1% 21.2% 14.1% 11.1% 12.9% 14.0% 14.1% 32.6% -12.3% 18.3%
1994 1.3% 4.2% 4.5% 5.5% 5.6% 14.1% 7.1% 7.8% 5.3% -11.9%
1995 37.6% 0.8% 21.0% 32.9% 23.3% 9.4% 16.9% 11.2% 20.3% 33.5%
1996 23.0% 5.1% 15.5% 19.2% 17.7% 11.3% 16.4% 6.0% 33.9% -4.4%
1997 33.4% 15.7% 26.6% 33.7% 27.2% 9.8% 27.7% 1.8% -14.1% 15.4%
1998 28.6% 6.3% 18.9% 22.4% 17.9% 1.7% 18.5% 20.0% -35.7% 16.5%
1999 21.0% 18.9% 21.2% 21.2% 19.1% 13.5% 21.0% 27.0% 40.9% -14.9%
2000 -9.1% 19.3% 7.4% 0.1% 6.0% 20.8% 13.1% -14.2% 49.7% 20.0%
2001 -11.9% -3.3% -10.9% -8.9% -10.7% -4.9% -10.6% -21.4% -31.9% 3.4%
2002 -22.1% 6.2% -7.6% -13.2% -8.8% 0.1% -8.6% -15.9% 32.1% 16.2%
2003 28.7% 4.1% 19.4% 25.9% 22.4% 7.5% 21.8% 38.6% 20.7% 0.8%
2004 10.9% 4.9% 8.3% 10.4% 9.5% 10.1% 9.5% 20.2% 17.3% 8.7%
2005 4.9% 5.3% 4.2% 5.0% 4.4% 10.0% 6.7% 13.5% 25.6% 8.8%
2006 15.8% 15.6% 13.3% 17.8% 14.1% 13.7% 15.2% 26.3% -15.1% -1.1%
2007 5.5% 6.6% 6.6% 6.2% 5.5% 4.9% 9.5% 11.2% 32.7% -0.8%
2008 -37.0% -5.3% -28.7% -31.3% -30.2% -4.0% -26.8% -43.4% -46.5% 41.3%
2009 26.5% 15.7% 25.9% 32.1% 28.5% 12.6% 31.5% 31.8% 13.5% -25.9%
2010 15.1% -12.9% 5.9% 11.2% 7.7% -4.9% 9.0% 7.8% 9.0% 8.7%
2011 2.1% 4.2% 5.7% 7.3% 6.4% 1.7% 6.2% -12.1% -1.2% 35.4%
2012 16.0% -13.2% 5.2% 11.0% 7.5% -3.0% 8.1% 17.3% 0.1% 2.4%
2013 32.4% -11.6% 13.3% 19.1% 16.4% -0.7% 12.3% 22.8% -1.2% -15.0%
2014 13.7% 0.3% 5.6% 6.2% 5.5% -5.2% 6.4% -4.9% -33.1% 29.3%
2015 1.4% 4.8% 5.2% 4.0% 4.3% 5.8% 6.4% -0.8% -32.9% -3.1%
Exhibit 11: This exhibit provides annual returns for each year since 1987 of Options-selling and traditional indices. While the
Options-selling indices generally underperform the S&P 500 in years when the S&P 500 has very strong performance, they tend to
have more favorable returns in years in which the S&P 500 is flat or experiences losses.
Source: Bloomberg.
“Performance Analysis of CBOE S&P 500 Options‐Selling Indices” (January 2016) Please see the last slide for important disclosures. 18
 Exhibit 12: Gross Premium Earned Over Rolling Six‐Month Periods 
for BXM vs. BXMD
(November 1988 to November 2015) Exhibit 12: This exhibit provides
the gross premium earned by
writing calls for the BXM and
BMXD indices as a percent of
the level of the underlying S&P
Gross Premiums - Higher for A-T-M 500. If the calls expire out-of-the-
(vs. O-T-M) Option-writing. money, this premium reflects
income generated by the
strategy. This income will be
mitigated by the extent to which
the calls expire in-the-money.
The exhibit reflects the higher
premium generated by the at-
the-money calls of the BXM
index. While the BXM Index
generated more gross premiums
than the BXMD Index, note in
the table that the BXMD Index
had higher net returns than the
BXM Index in all six of the bullish
years from 2009 through 2014.
The average cumulative six-
month gross premium generated
by the BXM Index was 10.4%,
while the BXMD generated 4.6%
per six-month period.
Sources: Bloomberg and CBOE.

Net Returns in Recent Years 2007 2008 2009 2010 2011 2012 2013 2014 2015
CBOE S&P 500 BuyWrite Index (BXM) 6.6% -28.7% 25.9% 5.9% 5.7% 5.2% 13.3% 5.6% 5.2%
CBOE S&P 500 30-Delta BuyWrite Index (BXMD) 6.2% -31.3% 32.1% 11.2% 7.3% 11.0% 19.1% 6.2% 4.0%
S&P 500 5.5% -37.0% 26.5% 15.1% 2.5% 15.5% 32.4% 13.7% 1.4%

“Performance Analysis of CBOE S&P 500 Option‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
19
 Exhibit 13: Gross Premium Earned Over Rolling Six Month Periods for Weekly
(WPUT) vs. Monthly (PUT) PutWrite Indices
(June 2007 to December 2015)
Cumulative Gross Premiums -
Higher for Writing Options Once
a Week (vs. Once a Month)
Exhibit 13: The CBOE S&P 500 One-
Week PutWrite Index (WPUT) was not
covered in most exhibits in this paper
because its data history begins in 2006.
The WPUT Index writes cash-secured
SPX put options once a week, as
opposed to once a month for the PUT
index. This exhibit provides the gross
premium earned by writing puts for the
WPUT and PUT indices as a percent of
the level of the underlying S&P 500. If the
puts expire out-of-the-money, this
premium reflects income generated by
the strategy. This income will be
mitigated by the extent to which the puts
expire in-the-money. The exhibit reflects
the higher cumulative premium
generated by the weekly puts of the
WPUT index due the increasing level of
premium decay as options approach
expiration. The average cumulative six-
month premium was 21.3% for WPUT
and 13.2% for PUT.
Sources: Bloomberg and CBOE.

Net Returns in Recent Years 2007 2008 2009 2010 2011 2012 2013 2014 2015
CBOE S&P 500 One-Week PutWrite Index (WPUT) 10.2% -15.2% 15.2% 6.9% 3.9% 11.5% 14.4% 0.2% 0.4%
CBOE S&P 500 PutWrite Index (PUT) 9.5% -26.8% 31.5% 9.0% 6.2% 8.1% 12.3% 6.4% 6.4%
S&P 500 5.5% -37.0% 26.5% 15.1% 2.5% 15.5% 32.4% 13.7% 1.4%

“Performance Analysis of CBOE S&P 500 Option‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
20
Exhibit 14: Richness is calculated as the level of the CBOE Volatility Index (VIX© Index) at the start of a 30-day period (implied volatility) minus the annualized
standard deviation of returns of the S&P 500 that is actually realized in that 30-day period (realized volatility). Since the VIX index is a forward looking measure,
each VIX index level corresponds with the same 30-day period as the forward looking annualized standard deviation calculation. During times when this richness
measure is positive, sellers of options may earn a profit relative to the amount by which implied volatility exceeds realized volatility. During the 25-year period
shown in this chart, the average level of the VIX index was about 19.8 and the average realized volatility was 18.7%, so the S&P 500 Index options were richly
priced by about 1.1%. Please note that the final calculation in this time series is made on Dec. 2, 2015 to cover data through Dec. 31, 2015 since these measures
are forward looking.
Sources: Morningstar and Bloomberg.

“Performance Analysis of CBOE S&P 500 Option‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
21
 Exhibit 15: Notional Value of Average Daily Volume in S&P 500 Options
(in $Billions)
(2000 – 2015)

More than $190 billion per day in 2015

Exhibit 15: Fund managers examine trading liquidity and capacity when considering investment vehicles. The approximate daily
notional value of trading in SPX options in 2015 can be estimated by multiplying the average daily volume times the value of the S&P
500 Index times the $100 options contract multiplier, for a value of more than $193 billion per day. Some investors use a delta-
weighting multiplier to develop a more conservative estimate for notional value of options trading.
Sources: Bloomberg and CBOE.

“Performance Analysis of CBOE S&P 500 Option‐Selling Indices” (January 2016) Please see the last slide for important disclosures.
22
Chicago Board Options Exchange® (CBOE®) provided financial support for the research for this paper.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics 
and Risks of Standardized Options. Copies are available from your broker, by calling 1‐888‐OPTIONS, or from The Options Clearing
Corporation at www.theocc.com. The information in this paper is provided for general education and information purposes only. No
statement within this paper should be construed as a recommendation to buy or sell a security or to provide investment advice. The BXM, 
BXMD, BFLY, CMBO, CNDR, PUT and WPUT indices (the “Indexes”) are designed to represent proposed hypothetical options strategies. The 
actual performance of investment vehicles such as mutual funds or managed accounts can have significant differences from the performance 
of the Indexes. Investors attempting to replicate the Indexes should discuss with their advisors possible timing and liquidity issues.  Like many 
passive benchmarks, the Indexes do not take into account significant factors such as transaction costs and taxes. Transaction costs and taxes 
for strategies such as the Indexes could be significantly higher than transaction costs for a passive strategy of buying‐and‐holding stocks. 
Investors should consult their tax advisor as to how taxes affect the outcome of contemplated options transactions.

Past performance does not guarantee future results. This document contains index performance data based on back‐testing, i.e., calculations 
of how the index might have performed prior to launch. Back‐tested performance information is purely hypothetical and is provided in this 
paper solely for informational purposes. Back‐tested performance does not represent actual performance and should not be interpreted as 
an indication of actual performance. No representation is being made that any investment will or is likely to achieve a performance record 
similar to that shown. It is not possible to invest directly in an index.  CBOE calculates and disseminates the Indexes. Supporting 
documentation for any claims, comparisons, statistics or other technical data in this paper is available from CBOE upon request.

The methodologies of the Indexes are the property of Chicago Board Options Exchange, Incorporated (CBOE).  CBOE®, Chicago Board Options 
Exchange®, CBOE Volatility Index® and VIX® are registered trademarks and BXM, BXMD, BFLY, CMBO, CNDR, PUT, WPUT, BuyWrite, and 
PutWrite are service marks of CBOE.  S&P® and S&P 500® are registered trademarks of Standard and Poor's Financial Services, LLC and are 
licensed for use by CBOE. Financial products based on S&P indices are not sponsored, endorsed, sold or promoted by Standard & Poor’s, and 
Standard & Poor’s makes no representation regarding the advisability of investing in such products.  MSCI, and the MSCI index names are 
service marks of MSCI Inc. or its affiliates and have been licensed for use by CBOE. All other trademarks and service marks are the property of 
their respective owners. The Indexes and all other information provided by CBOE and its affiliates and their respective directors, officers, 
employees, agents, representatives and third party providers of information (the “Parties”) in connection with the Indexes (collectively 
“Data”) are presented "as is" and without representations or warranties of any kind. The Parties shall not be liable for loss or damage, direct, 
indirect or consequential, arising from any use of the Data or action taken in reliance upon the Data.  Redistribution, reproduction and/or 
photocopying in whole or in part are prohibited without the written permission of CBOE. Copyright © CBOE 2016. All Rights Reserved.
Please email comments to eszado@providence.edu, kblack@caia.org or institutional@cboe.com.

“Performance Analysis of CBOE S&P 500 Option‐Selling Indices” (January 2016) Please see the last slide for 
23
important disclosures.