CBOE Releases its First Social Media-Based Sentiment Benchmark

The index is designed to capture the signature of financial market sentiment and provide an indicator of market movement.

After two months of its deal with Social Market Analytics (SMA), the Chicago Board Options Exchange (CBOE), the largest U.S. options exchange, today launched the CBOE-SMA Large Cap Index (SMLC Index). SMLC Index is the first of a series of sentiment-based strategy benchmark indexes that measure short-term market momentum depending on Chicago-based SMA’s social media metrics.

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Earlier in June, CBOE struck a deal to license social media data and metrics from Social Market Analytics to develop a series of sentiment-based strategy indexes. The benchmarks aim at providing investors with signals to help identify potential investments through tracking the performance of a portfolio of stocks or options referenced to a defined universe of stocks.

With more and more news breaking on social media, SMA, headquartered in Chicago, provides actionable intelligence from social media sources. The company’s patented process extracts relevant tweets, validates their sources and evaluates their meanings.

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A powerful tool but vulnerable to rumors

While monitoring social media intelligence has become increasingly important in recent years, it remains vulnerable to rumors, hoaxes and frauds aimed at manipulating prices. The SMLC Index is designed to track the performance of a hypothetical strategy that on a daily basis buys an equally weighted portfolio of 25 stocks with high SMA S-Scores.

The industry for financial market sentiment from social media has come a long way in recent years. Finance Magnates covered earlier this month when financial services firm Scottrade, Inc. partnered with social media event detection platform Contix to provide its clients with real-time breaking news alerts on ScottradeELITE platform.

According to CBOE, the new index’s portfolio is constituted daily at 8:30 a.m. CT from CBOE’s Large-Cap Universe on the basis of SMA S-Scores at 8:10 a.m. CT. Stocks in CBOE’s Large-Cap Universe are in the top 15 percent capitalization tranche of underlying shares for options listed on CBOE and have market capitalizations that are equal to or greater than $10 billion.

The SMLC Index is calculated by CBOE each business day at 3:00 p.m. CT. The hypothetical value of the index is held in cash until 8:30 a.m. CT the following business day, when it is reinvested in the next SMLC portfolio.


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