CBOE S&P 500 BuyWrite Index

Definition

The term CBOE S&P 500 BuyWrite Index refers to a composite that tracks the performance of a hypothetical covered call strategy involving companies in the S&P 500.  The CBOE S&P 500 BuyWrite Index is published and maintained by the Chicago Board Options Exchange (CBOE) under an agreement with Standard & Poor's.

Explanation

The CBOE S&P 500 BuyWrite Index (BXM) is designed to mimic the performance of a buy-write strategy applied to the S&P 500.  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 S&P 500) 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 S&P 500 BuyWrite Index is a passive index involving the purchase of stocks of companies appearing in the S&P 500 (SPX) and the writing of a SPXSM call option.  The SPXSM 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 S&P 500 BuyWrite Index trades under the symbol BXM.

Related Terms

CBOE Russell 2000 BuyWrite Index, CBOE NASDAQ 100 BuyWrite Index, CBOE DJIA BuyWrite Index, Wilshire 2500 Value