While indexes measuring US small-cap stocks have retreated in 2018 amid heightened US equity market volatility, four indexes designed to benchmark US small-cap options strategies have fared better year-to-date, according to new data from the Chicago Board Options Exchange (Cboe) and global index provider FTSE Russell.
While the Russell 2000 Index was up slightly for 2018 as of market close on Friday, October 12, the Cboe Russell 2000 BuyWrite Index (BXR), 30 Delta BuyWrite Index (BXRD), Conditional BuyWrite Index (BXRC) and Zero Cost Put Spread Collar Index (CLLR) have all posted higher relative returns for the same time period.
Cboe benchmark indexes measure the performance of strategies using index options:
The Cboe Russell 2000 BuyWrite Index is a suitable benchmark for a portfolio that sells Russell 2000 Index call options against a portfolio of the stocks included in the Russell 2000 Index.
The Cboe Russell 2000 Conditional BuyWrite Index is a suitable benchmark for a covered call strategy that holds a long position indexed to the Russell 2000 Index and sells a monthly at-the-money Russell 2000 Index call option.
The Cboe Russell 2000 30 Delta BuyWrite Index is a suitable benchmark for a covered call strategy that holds a long position indexed to the Russell 2000 Index and sells a monthly out-of-the-money Russell 2000 Index call option.
The Cboe Russell 2000 Zero Cost Put Spread Collar Index is a suitable benchmark for an options trading strategy that 1) holds a long position indexed to the Russell 2000 Index; 2) on a monthly basis buys a 2.5-5% Russell 2000 Index put option spread; and 3) sells a monthly out-of-the-money Russell 2000 call option to cover the cost of the put spread.
Sean Smith – managing director, derivatives licensing, FTSE Russell:
“It is important for investors to have access to index tools that accurately measure the relative performance of options strategies across different market cycles. The relative performance of the Russell 2000 Index to Russell 2000 Index-based options strategies from Cboe in 2018 helps illustrate the importance to investors of having additional index tools to help assess and manage market risk.”
Richard Rosenthal – director, business development, Cboe:
“Investors often implement options-based strategies in their portfolios to manage market risk and the Cboe benchmark indexes can be an important tool to pursue this objective.”
For more information on derivatives based on indexes from FTSE Russell, go to the FTSE Russell website.
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