CBOE Unveils Enhanced Growth Indexes with 13 New Series Tied to SPX Options

The 13 new CBOE indexes target enhanced capped returns based on an S&P500 options portfolio.

The Chicago Board Options Exchange (CBOE) has just unveiled a series of enhanced growth indexes, adding to its family of options-based strategy performance benchmarks with the 13 new indexes.

The new products are designed to target the outcomes of specific investment strategies, according to an official update from the CBOE regarding the launch. The news follows after CBOE Holdings reported its June 2016 trading metrics.

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Targeting annual returns

The indexes measure the performance of a hypothetical portfolio of SPX FLEX options on the S&P500 Index designed to offer targeted annual returns, as explained in the update.

They have been streaming prices since June 24th 2016 and take a similar approach to the CBOE S&P Buffer Protect Indexes that were unveiled in April, yet target a different return profile.

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12 months and one composite

Of the 13 indexes, 12 represent each calendar month with a one-year target, and 1 represents a balanced index that is a composite of the 12 monthly indexes and is equally weighted based on the respective roll forward dates of each monthly series at their year-end roll.

An example of how the roll dates overlap for the first four calendar months indexes can be seen in a graphic below from the CBOE website:

Source: CBOE
Source: CBOE

 

Each index in the series provides a specific time-horizon target and enhances the upside by as much as twice (capped) while the downside remains at 1:1 relative to the underlying. In addition, any premium or discount to enter the strategy is removed (which could be otherwise incurred in the underlying as a positive or negative premium – such as when buying SPX FLEX options).

Asset management firm, Vest Financial Group Inc. (Vest) which CBOE had taken a majority investment in earlier this year, will be the first to offer products on the new index series. Vest provides protective strategies structured with options-based investments within its platform technology offering.

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