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Cboe S&P 500 BuyWrite Index
As of 2021-04-16 16:15:01 (ET)
  • Overview
  • Performance

The Cboe S&P 500 BuyWrite Index (BXMSM)

The Cboe S&P 500 BuyWrite IndexSM (BXM) is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index®.

Announced in April 2002, the BXM Index was developed by the Cboe in cooperation with Standard & Poor's. To help in the development of the BXM Index, the Cboe commissioned Professor Robert Whaley to compile and analyze relevant data from the time period from June 1988 through December 2001. Data on daily BXM prices now is available from June 30, 1986, to the present time (see below). The BXM is a passive total return index based on (1) buying an S&P 500 stock index portfolio, and (2) "writing" (or selling) the near-term S&P 500 Index (SPXSM) "covered" call option, generally on the third Friday of each month. The SPX call written will have about one month remaining to expiration, with an exercise price just above the prevailing index level (i.e., slightly out of the money). The SPX call is held until expiration and cash settled, at which time a new one-month, near-the-money call is written. Please visit the BXM FAQ for more information about the construction of the index.

Introduction to Buy-Write Strategies

A "Buy-Write" strategy generally is considered to be an investment strategy in which an investor buys a stock or a basket of stocks, and also writes covered call options that correspond to the stock or basket of stocks.

Buy-Write strategies provide option premium income that can help cushion downside moves in an equity portfolio, but Buy-Writes often under perform stocks in rising markets. Thus, some Buy-Write strategies significantly outperformed stocks in 2000 when stock prices fell, but Buy-Writes tended to under perform stocks in the years 1995 - 1998 when the S&P 500 rose by more than 20% per year.

Buy-Write strategies have an added attraction to some investors in that Buy-Writes can help lessen the overall volatility in many portfolios.

Study on Index Options Writing by Asset Consulting Group

In February 2012 the Asset Consulting Group published a six-page paper -- "An Analysis of Index Option Writing for Liquid Enhanced Risk-Adjusted Returns". Key findings of the paper include:

  • Total Growth. Total growth for indexes since mid-1986 was 1153% for PUT Index, 830% for BXM Index, 807% for S&P 500® Index, and 368% for CLL Index (Exhibits 2 and 6).
  • Lower Volatility. The PUT, BXM, and CLL indices all had volatility that was about 30 percent lower than the volatility of the S&P 500 Index (Exhibit 4).
  • Left-tail Risk. Over the past 25 years, the worst monthly loss for the S&P 500 Index was a decline of 21.5 percent, compared to a relatively modest 8.6-percent monthly decline for the CLL Index (Exhibit 8e).
  • Risk-adjusted Returns. One measure of risk-adjusted returns, the Sortino Ratio, was 0.90 for the PUT Index, 0.75 for BXY, 0.71 for BXM, 0.50 for S&P 500, and 0.31 for CLL Index (Exhibits 10 and 11). Please note that all the indexes had negative skewness.
  • Monthly Premium Income. The average for the gross monthly premiums collected by the BXM Index was 1.8 percent. The index options usually were richly priced (Exhibits 12 and 13).

For more information, please see the six-page paper and press release.

Ibbotson Case Study on BXM Index

In September 2004 the Ibbotson Associates consulting firm issued a case study on the investment strategy represented by the Cboe S&P 500 BuyWrite Index (BXMSM). The study was three-fold: 1) assess risk-adjusted performance of the BXM; 2) evaluate the role of this covered-call strategy in a portfolio; and 3) establish if an investor can implement the strategy. Please visit these links to see a 4-page paper with a summary of highlightsa press release and the 35-page study.



Q - 1. Why was the Cboe S&P 500 BuyWrite Index (BXM) created?

A - 1. Around the year 2000, the Cboe Options Exchange (Cboe) received general interest from institutional and individual customers in having the Exchange create a benchmark index to measure the performance of certain stock and options strategies. The Cboe believes that the introduction of the BXM index could lead to more long-term customer interest in and use of Cboe index options.

Q - 2. Which organization has created and updated the BXM Index?

A - 2. The BXM Index was developed by the Cboe in cooperation with Standard & Poor's. To help in the development of the BXM Index, the Cboe commissioned Professor Robert Whaley (then of Duke University) to compile and analyze relevant data from the time period from June 1988 through December 2001. Data on daily BXM prices now is available from June 30, 1986, to the present time. The Cboe has a business relationship with Standard & Poor's on the BXM. The Cboe is responsible for the daily updating of the BXM Index. The Cboe has filed for patent protection for the methodology of the BXM Index.

Q - 3. What time period is covered by the BXM Index?

A - 3. Daily prices are provided in an historical return series for the BXM Index beginning June 30, 1986 up through the present time. The daily prices are available at, and from Bloomberg and other quote vendors that provide options data.

Q - 4. What is the price level of BXM?

A - 4. The BXM daily prices are available at, and from quote vendors that provide options data. The price level of BXM was 92.21 on June 30, 1986, and was set to 100 on June 1, 1988, the first day that Standard and Poor's began reporting the daily cash dividends for the S&P 500 index portfolio.

Q - 5. How is the BXM Index calculated?

A - 5. The BXM is a passive total return index based on selling the near-term, near-the-money S&P 500 Index (SPX®) call option against the S&P 500 stock index portfolio each month. The SPX call that is sold (or written) will have approximately one month remaining to expiration, with an exercise price just above the prevailing index level (i.e., slightly out of the money). The premium collected from the sale of the call is added to the portfolio's total value. The SPX call is held until its expiration, at which time a new one-month, near-the-money call is written. The expired option, if exercised, is settled in cash. Click here for more details about the methodology for the BXM Index. Investors attempting to replicate the BXM Index should discuss with their brokers possible timing and liquidity issues.

Q - 6. How often is the BXM Index calculated and disseminated?

A - 6. The BXM Index is calculated in real-time by the Cboe every fifteen seconds during each trading day, except that on the third Friday "roll dates," the BXM Index generally begins its fifteen-second updates in the afternoon.

Q - 7. Can an investor gain exposure to BXM through tradable, investable instruments?

A - 7. Here is a three-part answer to this question: In March 2002 the Cboe began disseminating BXM prices as a general indication of a hypothetical S&P 500 buy-write strategy. The Cboe does not provide specific recommendations for investment funds, but interested investors might explore the possibility of doing some research on the returns and risks of investment funds that engage in covered call writing for at least a portion of their investment portfolios. Reports indicate that there now are investment products designed to track the BXM Index, including a structured product, closed-end fund, exchange-traded note (ETN), and exchange traded fund (ETF). Experienced investors also could ask their brokers about the possibility of directly engaging in an S&P 500 buy-write strategy by investing in stocks and SPX options.

As always, investors interested in this and other buy-write strategies should consult with their brokers and legal advisors for applicable advice on relevant issues, including but not limited to considerations regarding margin requirements. For more information about margin requirements, please see Cboe Rule 12.3, Cboe Regulatory Circular RG99-09, and the Cboe web site at In addition, please see Regulatory Circular RG02-46 -- "Time at Which Expiring AM-Settled Index Options are Considered Exercised, Assigned or Purged."

Q - 8. How has the BXM performed in different types of market environments?

A - 8. The added income from the covered calls in a BXM position often has provided a cushion in times of flat to declining markets. On the other hand, in times when the stock market was rising rapidly, SPX buy-write strategies generally underperformed the S&P 500. Please see the charts, tables and publications at this website for more specific information on returns and risks. Cboe members and member firms desiring to market the BXM Index and/or the BXM returns to current or potential customers should please note that they are subject to the detailed requirements of Cboe Rule 9.21 - "Communications to Customers."

Q - 9. What type of volatility has the BXM had in past years?

A - 9. A potentially attractive feature to some investors has been the relative steadiness and low volatility of BXM returns; from June 1988 through December 2006, the annualized standard deviation of returns was 13.8% for the S&P 500 and 9.2% for BXM.

Q - 10. What are the risks of engaging in a strategy designed to track BXM?

A - 10. It is expected that buy-write positions generally will have lower returns than stocks in times of rising stock markets. A covered call writer does not participate in upside stock gains beyond the strike price plus the premium received. In addressing issues regarding writing covered calls using index options, Cboe Regulatory Circular RG99-09 provides in part that: "As a reminder, it is important to understand that due to the cash settlement feature of SPX® options and the "timing risk" involved, there is an inherent limitation on the ability of writers of SPX® options to cover the risk exposure by holding positions in SPDRS®." Commissions, taxes, market impact costs and other transaction costs will reduce returns so that an investor might find it difficult to match BXM returns. 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. Past performance does not guarantee future results.

Q - 11. Are commissions and other transaction costs included in BXM, and are the BXM results achievable by individual and institutional investors?

A - 11. Like many passive indexes, the BXM Index does not take into account significant factors such as transaction costs and taxes and, because of factors such as these, many or most investors should be expected to underperform passive indexes. The BXM Index is designed to represent general trends for a hypothetical buy-write strategy. Prior to 2003, the BXM methodology used an assumption that the SPX options were sold at the bid price (rather than the mid-point of the bid-ask). Transaction costs for a buy-write strategy such as the BXM could be significantly higher than transaction costs for a passive strategy of buying-and-holding stocks.

Information On S&P 500 (SPX) And Other Index Options

Q - 12. Could you provide a sample price and notional value for S&P 500 (SPX) options?

A- 12. For example, on Friday, December 21, 2001, the S&P 500 closing price was 1139.93. The SPX options have a $100 multiplier, so the notional value covered by one SPX option was approximately $114,000. On December 21 the "January 2002 1150 SPX calls" (calls with an 1150 strike price that expired on Jan. 18, 2002) had a reported bid price of 20.10, so that a seller of a Jan. 1150 SPX call at the bid price at the close should have received approximately $2,010.

Q - 13. What is the past trading volume and open interest for SPX index options?

A - 13. In 2007, the S&P 500 (SPX) options had an average daily volume of 629,819 contracts and an open interest of 8,187,410 contracts.

Q - 14. Does an investor need to worry about early exercise for short SPX call options positions?

A - 14. No, there is no early exercise for SPX options. Unlike equity and certain other index options, SPX call options have "European-style" exercise, that is, SPX options generally may be exercised only on the last business day before expiration.

Q - 15. What is the settlement procedure for SPX call options positions?

A - 15. SPX options have "A.M.-settlement," usually on the third Friday of the month. Please see the SPX options contract specifications for more information.

Q - 16. What other index options are available at the Cboe?

A - 16. In addition to SPX options, the Cboe offers (1) cash-settled options based on a number of stock indexes, including the Cboe Volatility Index (VIX), S&P 100 (XEO and OEX), Dow Jones Industrial Average (DJX), Nasdaq-100 (NDX and MNX), Russell 2000 (RUT), and several sectors; and (2) options on exchange-traded funds based on the Nasdaq-100 (QQQ) Dow (DIA), and S&P 100 (OEF). These different indexes have different settlement procedures and early exercise considerations, which should be understood prior to trading in them. Click on any of the product links in this answer for more information on index options.

Q - 17. How can investors learn more about index options strategies?

A - 17. Investors can learn more about index options by taking a course at the Options Institute.