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Cboe Releases New White Paper on Options-Based Funds and Benchmark Indexes

Traders Magazine Online News, March 14, 2018

John D'Antona Jr.

Cboe Global Markets, Inc. (Cboe: CBOE | Nasdaq: CBOE), announced the publication of a new study, “Performance Analysis of Optio n-Based Equity Mutual Funds, CEFs and ETFs: An Update.” The new white paper modernizes the original findings of 2014 study of SEC registered option-based funds, which focus on broad-based U.S. equities.

The new white paper, finds that the number of options-based funds continued to grow from just 10 in 2000 to 157 in 2017, and presents a sample of equity funds and funds with objectives other than broad-based U.S. equities.

Performance analysis of funds benchmarked to indexes beyond diversified U.S. equities is not conducted in this study.

Keith Black, Ph.D, CAIA, CFA, Managing Director, Curriculum and Exams, Chartered Alternative Investment Analyst (CAIA) Association and Edward Szado, Assistant Professor of Finance, Providence College, conducted the study and authored the white paper.

The study analyzed the equal-weighted performance of a subset (nearly two-thirds) of the 157 options-based funds – those that focus on use of U.S. stock index options and/or equity options, usually held in a portfolio along with equity securities during the 17-year period from 2000 through 2017.

The white paper also expanded the analysis of performance from mid-1986 through the end of 2017 for some “traditional” benchmark indexes, as well as for options-based benchmark indexes, such as the Cboe S&P 500 BuyWrite Index (BXM), Cboe S&P 500 PutWrite Index (PUT) and the Cboe S&P 500 2% OTM BuyWrite Index (BXY) that each use S&P 500 Index (SPX) options. The updated study also found that the notional value of average daily volume in SPX options rose from $13 billion in 2000 to $287 billion in 2017.

Key findings of the study include:

? Less volatility for options-based funds: As a group, the options-based funds had less volatility and less

severe drawdowns than the stock and commodity indexes studied.

? Cboe BXMD Index had highest returns and less volatility: The Cboe S&P 500 30-Delta BuyWrite Index

(BXMD) had the highest returns (of the eight benchmarks analyzed) and lower volatility than the S&P 500, MSCI EAFE and S&P GSCI Indexes.

? Better risk-adjusted returns: Cboe’s BXM, PUT and BXMD Indexes all had higher risk-adjusted returns

(as measured by the Sharpe Ratio and Sortino Ratio) than the S&P 500 and S&P GSCI Indexes.

For a more comprehensive version of this paper, visit

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