STOXX Ltd has launched the Dow Jones EURO STOXX 50 BuyWrite Index, the first pan-European buy-write indexmeasuring the performance of a hypothetical portfolio of a long position of the Dow
STOXX Ltd has launched the Dow Jones EURO STOXX 50 BuyWrite Index, the first pan-European buy-write indexmeasuring the performance of a hypothetical portfolio of a long position of the Dow Jones EURO STOXX 50 Index and a sold call option based on the Dow Jones EURO STOXX 50 Index.
The Dow Jones EURO STOXX 50 BuyWrite Index is designed to underlie financial products and has been licensed to Lyxor AM, a wholly owned subsidiary of Société Générale, to serve as an underlying for an exchange-traded fund (ETF). The ETF is expected to launch in early November 2006 pending regulatory approval and initially will be listed on Euronext.
‘The Dow Jones EURO STOXX 50 BuyWrite Index is an ideal tool to boost returns in bear and sideward markets,’ says Lars Hamich, managing director of STOXX Ltd. ‘Since 31 December 1999, the Dow Jones EURO STOXX 50 BuyWrite Index has outperformed the Dow Jones EURO STOXX 50 Index by 63 percentage points – with even less volatility. The Dow Jones EURO STOXX 50 index options are the largest contracts based on open interest globally. The high liquidity of these options enables us to further expand our index family based on option prices.’
Since inception on 31 December 1999, the Dow Jones EURO STOXX 50 BuyWrite Index has gained 67.9%, whereas the Dow Jones EURO STOXX 50 Index is down -22,75%.
‘STOXX’s expertise in providing tradable and transparent indices means that the new index is an ideal underlying index for an ETF,’ says Isabelle Bourcier, ETF Global Coordinator for Lyxor AM. ‘Few index providers or exchanges across continents have launched ‘strategy indices’ that systematically roll buy-write or covered call strategies on a monthly basis. However, it is a common strategy implemented by institutional investors. We believe that an ETF based on strategy indices offer an efficient solution to investors who are neutral or moderately bullish.’
The Dow Jones EURO STOXX 50 BuyWrite Index combines the Dow Jones EURO STOXX 50 Index and a Dow Jones EURO STOXX 50 call option. These two components are held in equal amounts and are adjusted on a monthly basis. Every month a new one-month Dow Jones EURO STOXX 50 call option replaces the previous expiring Dow Jones EURO STOXX 50 call option. The new one-month Dow Jones EURO STOXX 50 call option must have a remaining lifetime of one month and must be 5 percent out of the money, i.e. highest strike price below or equal to the Dow Jones EURO STOXX 50 settlement price plus 5 per cent.
Historical data for the Dow Jones EURO STOXX 50 BuyWrite Index is available back to 31 December 1999. The Dow Jones EURO STOXX 50 BuyWrite Index is calculated by Deutsche Börse AG.
