CBOE Russell 2000 BuyWrite Index

Definition

The term CBOE Russell 2000 BuyWrite Index refers to a composite that tracks the performance of a hypothetical covered call strategy involving companies in the Russell 2000.  The CBOE Russell 2000 BuyWrite Index is published and maintained by the Chicago Board Options Exchange (CBOE) under an agreement with The Frank Russell Company.

Explanation

The CBOE Russell 2000 BuyWrite Index (BXR) is designed to mimic the performance of a buy-write strategy applied to the Russell 2000.  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 Russell 2000) 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 Russell 2000 BuyWrite Index is a passive index involving the purchase of stocks of companies appearing in the Russell 2000 and the writing of a RUT call option.  The RUT 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 Russell 2000 BuyWrite Index trades under the symbol BXR.

Related Terms

CBOE S&P 500 BuyWrite Index, CBOE NASDAQ 100 BuyWrite Index, CBOE DJIA BuyWrite Index, Wilshire 2500 Value