The CBOE S&P DJIA BuyWrite Index
(ticker symbol BXD) is a benchmark index designed to show the hypothetical performance of a portfolio that engages in a buy-write
strategy on the Dow Jones Industrial Average
The term buy-write is used because the investor buys
stocks and writes
against the stock position. The writing of the call option provides extra income for an investor who is willing to forego some upside potential.
The BXD Index is designed to show the hypothetical performance of a strategy in which an investor buys a portfolio of the 30 stocks in the DJIA
, and also sells (or writes) covered call
options on the DJIA
Investors have used exchange-listed options to engage in buy-write strategies since the 1970s, but prior to 2002 there was no major benchmark for buy-write strategies. In 2000 and 2001, options portfolio managers requested that the Chicago Board Options Exchange
develop benchmark indexes for buy-write strategies. The CBOE S&P 500 BuyWrite Index
was introduced in 2002, and the CBOE DJIA BuyWrite Index (BXD) was introduced in 2005.
Investors have used covered call strategies for more than three decades. As noted in a magazine article “Buy Writing Makes Comeback as Way to Hedge Risk.” Pensions & Investments
, (May 16, 2005), two developments have enhanced the interest in covered call strategies in recent years: (1) in 2002 the Chicago Board Options Exchange
introduced the first major benchmark... Read More