Chicago Board Options Exchange (CBOE) has launched the CBOE S&P 500 Range-Bound Premium Income Index, which is designed to serve as a benchmark for investors aiming for consistent income distributions while taking the view that short-term equity returns will be range-bound.
The CBOE S&P 500 Range-Bound Premium Income Index measures the performance of a hypothetical portfolio of short-term Treasury bills and exchange-traded Flexible Exchange (FLEX) options based on the S&P 500 Index (SPX). The index strategy is designed to deliver consistent monthly income distributions that have low correlations to returns from US domestic fixed-income markets and are neutral to the performance of the US equity markets.
“In the current low-interest-rate environment, the search for income has led many investors to employ higher-yielding assets that may not be of the highest quality, or long-duration bonds that may see negative price returns when interest rates rise,” says William Speth (pictured), vice president of research and product development, CBOE. “This new range-bound premium income index is designed to provide investors with a unique source of income that we believe has a low sensitivity to duration, credit and equity risks.”
The CBOE S&P 500 Range-Bound Premium Income Index is designed to track the returns of an investment that, over a period of approximately one month, seeks to provide a target level of premium income while at the same time minimising the risk of loss through the use of options positions.
The CBOE S&P 500 Range-Bound Premium Income Index has the ticker symbol SPRI.
Values for the index will be published at the end of each trading day and can be accessed on the CBOE website and through quote vendors. In addition, overviews and back-tested historical data for the index is available at www.cboe.com/SPRI.
The SPRI is the newest addition to CBOE’s expanding family of target-outcome indexes. Target- outcome investment strategies focus on delivering returns designed around specific goals, rather than an arbitrary measure of risk or opportunity.
CBOE Vest, an asset management firm that provides products and technology solutions based on target-outcome investment strategies, is expected to license the new index to create products.
