PUT Index Generated Lower Volatility, Less Severe Drawdowns, More Income and Better Risk-Adjusted Returns

The Cboe S&P 500 Putwrite Index (PUT) is designed to reflect a cash-secured put-writing strategy. The PUT strategy is designed to sell a sequence of one-month, at-the-money, S&P 500 (SPX) Index puts and invest cash at one- and three-month Treasury bill rates. The number of puts sold is limited so that the amount held in Treasury Bills can finance the loss from final settlement of the SPX puts.

In recent years the PUT Index and the cash-secured put-write strategy have gained more interest from and acceptance by fund managers.

With the increased volatility this month, we are receiving questions from investors and the news media about the impact of higher volatility and possible stock market declines on the performance of the PUT Index. We are fortunate in that the price history for the PUT Index goes back more than 31 years to mid-1986, and so analysts can see the absolute and relative returns in various market regimes – high- and low-volatility, and bullish and bearish stock markets.


So far in February 2018 (through Feb. 15), the S&P 500 (total return) index fell 3.1%, while the Cboe’s PUT and BXM indexes fell 1.7%. Many covered option-writing strategies are designed to provide a cushion in the event of a big drop in stock index prices.


The fact that the PUT Index engages in a cash-secured strategy that holds Treasury bills has helped the index have significantly lower standard deviations than the S&P 500, MSCI EAFE and S&P GSCI indexes since mid-1986.


A 2016 paper by Professor Oleg Bondarenko found that two indexes that engage in cash-secured writing of SPX puts had less severe drawdowns than the S&P 500® stock index. According to the paper, the worst drawdowns were down 32.7% for the PUT Index, down 24.2% for the Cboe S&P 500 One-week PutWrite Index (WPUT, an index that sells cash-secured SPX options every week), and down 50.9% for the S&P 500 Index.


As shown in the chart below, the PUT Index has generated gross premiums that have averaged 1.7% per month, and in the volatile year of 2008, the gross premiums generated topped 6% in two consecutive months.


Since 1990 the two years with the highest average levels for the Cboe Volatility Index® (VIX®) were 2009 and 2009, years in which the S&P 500 total return index fell 37% and rose 26.5%, respectively. As shown in the table below, during both those years the PUT Index had higher returns than the S&P 500 Index; in 2008 the premiums received by the PUT Index served as a cushion during the big drawdown for stocks, and in 2009 the average daily closing level for the VIX Index was 31.5 (the second highest value for any year), and the aggregate amount of gross premiums received by the PUT Index totaled 38.6%.



Many investors are interested in indexes that have relatively strong risk-adjusted returns. Exhibit 19 of the 2016 paper by Oleg Bondarenko showed that, since mid-1986, the PUT Index had stronger risk-adjusted returns (as measured by the Sharpe Ratio, Sortino Ratio (which looks at downside deviations), and Stutzer Index (which makes adjustments for positive or negative skewness) than three stock indexes and a Treasury bond index.


To learn more as to how cash-secured put writing and the PUT Index can be used in the management of your portfolio, please visit www.cboe.com/PUT and click on the links to these white papers —


VIX Options and Futures Weekend Review for February 11, 2018

For the past few months writing this weekend review has been a difficult task.  How many different ways can I say VIX is low and reflecting low realized volatility in the S&P 500?  The past couple of weeks it has suddenly gotten much easier to talk about VIX. Last week was the first one week […]

Volatility Index and ETP Weekend Review for February 12, 2018

We experienced the biggest one week drop in two years last week for the S&P 500.  The result was the type of moves we haven’t seen in S&P 500 related volatility indexes since August 2015.  We got a 67% gain for VIX last week, with VIX3M gaining 46% and VXMT was 32% higher.  The result […]

Biggest-Ever One-Day Moves Today for Both VXST Index (Up 214.6%) and VIX Index (Up 115.6%) – By Matt Moran

Feb. 5, 2018 – Today was the second trading day in a row on which there was very strong volume on Cboe Global Markets’ options exchanges and futures exchange. Today there were record-breaking one-day percentage moves for both the Cboe Short-Term Volatility Index (VXST), which rose 214.6% to close at 59.34, and for the popular […]

Volatility Index and ETP Weekend Review for February 4, 2018

Of the four volatility indexes on the term structure chart below two have been around the longest.  Of course VIX with the other being VIX3M (formerly known as VXV).  The relationship between the 1-month volatility index and 3-month version usually has VIX at a discount to VIX3M.  Friday this relationship flipped for the first time […]

VIX Futures and Options Weekend Review for February 4, 2018

Last week VIX gained over 50% for the first time since August last year.  We all know most of this came Friday with the S&P 500 losing just over 2% on the day.  The obituaries being written about VIX after a historically tame year last year may have been a bit premature. Friday was a […]

Today the VIX Index Rose 28.5% and VIX Options Set a New Daily Volume Record – By Matt Moran

FRIDAY, FEB. 2, 2018 – The financial markets experienced some big moves today as investors’ had increased concerns about the possibility rising interest rates and inflation. BIG PRICE MOVES – Today the S&P 500 (SPX) Index fell 2.1%, the Cboe VIX of VIX Index (VVIX) rose 18.7%, and the Cboe Volatility Index® (VIX®) rose 28.5% […]

Weekend Review of VIX Futures and Options – 1/28/2018

VIX was lower last week, but that’s the only thing that lost value on the table / term structure chart below.  All the futures moved higher despite VIX moving lower, but also shaking off a very bullish week for the S&P 500.  We live in unusual times and there is much being written about the […]

Weekend Review of Volatility Indexes and ETPs – 1/28/2018

Three out of four volatility indexes that based their levels on SPX option trading were higher last week.  VIX was the lone loser with 9-day, 3-month, and 6-month volatility indexes all moving higher. The long volatility linked ETPs, based on US volatility, were all higher last week.  Note things were different in Europe as EVIX […]

Weekend Review of VIX Futures and Options – 1/21/2018

Although still at a historically low level, VIX showed some signs of life this past week trading above 12.00 for the first time since December 1st last year.  Standard January futures and options went off the board Wednesday morning settling well above 12.00.  The futures moved up a bit, but not nearly to the extent of […]

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