CBOE Introduces First in Series of Indexes Designed to Target Investment Outcomes
The CBOE S&P 500 Buffer Protect Indexes measure the performance of a hypothetical portfolio of S&P 500® Index (SPX) FLexible EXchange® (FLEX) options designed to provide annual targeted returns. CBOE started disseminating daily values for the new benchmarks on April 1, 2016.
The Vest Financial Group Inc., an asset management firm that provides options-based investments through structured protective strategies and innovative technology solutions, is the first to license the new indexes. Vest expects to use the Buffer Protect Indexes to create new products that will be available on its platform. CBOE made a majority equity investment in Vest in January 2016.
Each of the indexes in the CBOE S&P 500 Buffer Protect series is designed to track the returns of a hypothetical investment that, over a period of approximately one year, seeks to “buffer protect” against the first 10 percent of losses due to a decline in the SPX, while at the same time setting a capped level to the upside. The capped level of each of the indexes is determined on each annual roll date.
The strategy leverages options as risk management tools by enabling investors to limit downside losses while providing market participation up to a targeted level – essentially allowing investors to define their returns for the year. There is no premium or discount to enter into the strategy, compared with an outright investment in an index.
“We are excited to bring our experience to target-outcome investing, a growing space that we view as the next wave in options investing,” said Edward T. Tilly, CBOE’s Chief Executive Officer. “Target- outcome investments are designed to substantially reduce the complexity of options trading by enabling investors to clearly define their investment objectives and risk-return parameters. Our new indexes provide tangible measures of how options can be used to improve risk-adjusted returns.”
“CBOE is the global leader in developing options-based strategy performance benchmark indexes, and we welcome the opportunity to leverage CBOE’s expertise to develop products for our platform,” said Karan Sood, CEO of Vest.
The Buffer Protect Index series comprises 13 indexes, including 12 monthly series that roll on the third Wednesday of the month:
- CBOE S&P 500 Buffer Protect Index January Series (Ticker: SPRO01)
- CBOE S&P 500 Buffer Protect Index February Series (Ticker: SPRO02)
- CBOE S&P 500 Buffer Protect Index March Series (Ticker: SPRO03)
- CBOE S&P 500 Buffer Protect Index April Series (Ticker: SPRO04)
- CBOE S&P 500 Buffer Protect Index May Series (Ticker: SPRO05)
- CBOE S&P 500 Buffer Protect Index June Series (Ticker: SPRO06)
- CBOE S&P 500 Buffer Protect Index July Series (Ticker: SPRO07)
- CBOE S&P 500 Buffer Protect Index August Series (Ticker: SPRO08)
- CBOE S&P 500 Buffer Protect Index September Series (Ticker: SPRO09)
- CBOE S&P 500 Buffer Protect Index October Series (Ticker: SPRO10)
- CBOE S&P 500 Buffer Protect Index November Series (Ticker: SPRO11)
- CBOE S&P 500 Buffer Protect Index December Series (Ticker: SPRO12)
In addition, there is one balanced index, a composite of the 12 monthly series, in which each monthly series is allocated an equal weight at each monthly roll date:
- CBOE S&P 500 Buffer Protect Index Balanced Series (Ticker: SPRO)
Values for each of the indexes are published at the end of each trading day and can be accessed on the CBOE website and through quote vendors. In addition, overviews and historical data for each of the indexes are available at www.cboe.com/bufferprotect.