New Study by Black and Szado Analyzes Six Options-Based Benchmarks – BXM, PUT, BFLY, BXMD, CMBO, CNDR – By Matt Moran

A new study examines six benchmark indexes that write S&P 500® (SPX) index options, comparing their performances with those of traditional stock, bond and commodity benchmark indexes. The study, “Performance Analysis of CBOE S&P 500 Options-Selling Indices,” is the first comprehensive study that examines the performance of options-strategy benchmark indexes that incorporate iron condor and iron butterfly strategies. Commissioned by CBOE and co-authored by Keith Black, Ph.D., CAIA, CFA, managing director of the Chartered Alternative Investment Analyst Association, and Edward Szado, Ph.D., CFA., assistant professor of finance at Providence College and director of research at the Institute for Global Asset and Risk Management (INGARM), the study analyzed benchmark index performances for the 29½-year period from mid-1986 to the end of 2015. The options-based benchmarks studied were the CBOE S&P 500 BuyWrite Index (BXM); CBOE S&P 500 PutWrite Index (PUT); CBOE S&P 500 Iron Butterfly Index (BFLY); CBOE S&P 500 30-Delta BuyWrite Index (BXMD); CBOE S&P 500 Covered Combo Index (CMBO); and CBOE S&P 500 Iron Condor Index (CNDR).

Key findings of the study included:

1. PUT INDEX HAD HIGHEST RISK-ADJUSTED RETURNS, WITH RICH PRICING FOR INDEX OPTIONS. The PUT Index had the highest risk-adjusted returns (as measured by the Sortino Ratio, Sharpe Ratio, Stutzer Index and M2) of all the 10 indexes in Exhibit 7. The PUT Index engages in cash-secured writing of one-month SPX put options every month. A key source of strong returns for the PUT Index was the fact that the SPX index options usually were richly priced in recent decades.

1 - Risk-adj returns

2. HIGHER RETURNS. In comparing the performance of 10 benchmark indexes over a 29½-year-period, the indexes with the highest annualized returns were the BXMD (10.66 percent) and the PUT (10.13 percent).

2 - Ann returns BXMD PUT

3. LOWER VOLATILITY. The indexes with the lowest annualized standard deviation were the CNDR (7.23 percent) and PUT (10.16 percent).

3- Standa deviations thru 2015

4. LESS TAIL RISK FOR CNDR AND BFLY. A histogram analysis reflected a lower occurrence of large losses or large gains (less tail risk) for the options-selling indices than for the S&P 500 Index. Looking at monthly returns in the 29½ years between July 1986 and December 2015, the authors found the S&P 500 Index posted 15 months of losses worse than 6 percent during the period, while the CNDR Index logged 10 months worse than 6 percent and the BFLY two months worse than 6 percent. The out-of-the-money (O-T-M) puts purchased help lessen the risk of big monthly losses for key options-based benchmark indexes.

4 - CNDR P&L

5 - BFLY Histo5.5 PUT histo
5. GROSS PREMIUM RECEIVED FOR A-T-M AND O-T-M OPTION SELLING. Exhibit 12 shows the gross premium earned by writing calls for the BXM and BMXD indices as a percent of the level of the underlying S&P 500. If the calls expire out-of-the-money, this premium reflects income generated by the strategy. This income will be mitigated by the extent to which the calls expire in-the-money. The exhibit reflects the higher premium generated by the at-the-money calls of the BXM index. While the BXM Index generated more gross premiums than the BXMD Index, note in the table that the BXMD Index had higher net returns than the BXM Index in all six of the bullish years from 2009 through 2014. The average cumulative six-month gross premium generated by the BXM Index was 10.4%, while the BXMD generated 4.6% per six-month period. While the gross premium generated is a positive number, please see the net returns table below and note that the option-selling indexes have had losses in years such as 2008.

6 - Gross premium BXM BXMD

6. CAPACITY AND NOTIONAL VALUE. The average daily notional value for volume on the SPX options rose to more than $190 billion in 2015. Fund managers examine trading liquidity and capacity when considering investment vehicles.

7 - Notional value thru 2015

7. MORE INFORMATION Visit the CBOE Benchmarks microsite for links to the new paper and to several other options-based strategy papers. For data and information on the study, please visit


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