CBOE NASDAQ 100 BuyWrite Index

Definition

The term CBOE NASDAQ 100 BuyWrite Index refers to a composite that tracks the performance of a hypothetical covered call strategy involving companies in the NASDAQ 100.  The CBOE NASDAQ 100 BuyWrite Index is published and maintained by the Chicago Board Options Exchange (CBOE) under an agreement with the NASDAQ.

Explanation

The CBOE NASDAQ 100 BuyWrite Index (BXN) is designed to mimic the performance of a buy-write strategy applied to the NASDAQ 100.  Also referred to as a covered call, a buy-write is a strategy in which the investor purchases a portfolio of stocks (in this case the NASDAQ 100) and also sells call options on the same "basket" of stocks.  Buy-writes typically underperform stocks when their prices increase, and outperform stocks when their prices decline.

The CBOE NASDAQ 100 BuyWrite Index is a passive index involving the purchase of stocks of companies appearing in the NASDAQ 100 and the writing of a NDX call option.  The NDX will typically expire in one month and its exercise price is usually above the prevailing price of the index.  First published in 2002, the CBOE NASDAQ 100 BuyWrite Index trades under the symbol BXN.

Related Terms

CBOE S&P 500 BuyWrite Index, CBOE Russell 2000 BuyWrite Index, CBOE DJIA BuyWrite Index, Wilshire 2500 Value