CBOE To Introduce CBOE Low Volatility Index

 29/11/2012

The Chicago Board Options Exchange® (CBOE®) announced today that it will begin disseminating values for a new benchmark index, the CBOE Low Volatility IndexSM (ticker: LOVOL) tomorrow, Friday, November 30.

The CBOE LOVOL Index is designed for investors whose preferences have shifted from investing in riskier assets to lower-volatility assets. The new index aims to provide investors with the ability to replicate an investment strategy that is subject to less downside volatility in a portfolio of S&P 500® stocks, while still preserving the bulk of market gains.

The CBOE LOVOL Index is a blend of two of CBOE's most popular strategy benchmark indexes - the CBOE S&P 500 BuyWrite Index (BXMSM) and the CBOE VIX Tail Hedge IndexSM (VXTHSM). The LOVOL Index bridges the space between the BXM and VXTH strategies:
•The BXM strategy cushions returns against market downturns in exchange for lower returns in more bullish markets.
•The VXTH strategy provides substantial protection against severe downturns in exchange for lower returns in less volatile markets.

The CBOE LOVOL Index measures the performance of a portfolio that overlays SPX and CBOE Volatility Index® (VIX®) calls over the S&P 500 Index. Specifically, the index is obtained by holding a portfolio of S&P 500 stocks and simultaneously selling SPX calls and buying one-month VIX 30-delta calls on a monthly basis.

For the five-year period ending October 31, 2012, the annualized return for the LOVOL Index was 2.9 percent (versus 0.4 percent for the S&P 500 total return index). The standard deviation for the LOVOL Index during the same period was 13.6 percent (versus 19.1 percent for the S&P 500).

CBOE will disseminate the CBOE LOVOL Index value every 15 seconds during the trading day. The index values will be available from quote data vendors and on CBOE's website at http://www.cboe.com/LOVOL.

CBOE is the home of volatility indexes. An innovator in the volatility space and leading creator of measures that track market volatility, CBOE currently publishes data on more than two dozen volatility-related benchmarks and strategies.

For more information on the CBOE Low Volatility Index, including a white paper detailing LOVOL's development and methodology, see http://www.cboe.com/LOVOL.