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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Dan Duchardt who wrote (3671)	4/16/2002 12:18:07 AM
From: BDR	Read Replies (1) \| Respond to of 5205

Here is a risk free way to see how one particular buy/write strategy might work out in the long run. CBOE Publishes First Buy-Write Index, "BXM" On April 11, CBOE announced that it began disseminating the CBOE BuyWrite Monthly Index, (BXM). The BXM is a benchmark index that measures potential returns of a theoretical portfolio of Standard & Poor's 500 Index stocks that also systematically sells S&P 500 Index call options (SPX) against the portfolio. A "buy-write," also called a covered call, generally is an investment strategy in which an investor buys a stock or a basket of stocks, and sells call options that correspond to the stock or basket of stocks. This strategy can be used to enhance portfolio returns and reduce volatility. The BXM is a passive total return index based on selling the near-term, at-the-money S&P 500 Index (SPX) call option against the S&P 500 stock index portfolio each month, on the day the current contract expires. The SPX call that is sold (or written) will have one month remaining to expiration, with an exercise price just above the prevailing index level (i.e., slightly out-of-the-money). The premium collected from the sale of the call is added to the portfolio's total value. The SPX call is held until its expiration, at which time a new one-month, at-the-money call is written. The expired option, if exercised, is settled in cash. The new index is calculated and disseminated under the symbol "BXM", on a daily basis, using closing prices of the S&P 500 Index and the closing price of the selected SPX call. BXM levels can be accessed through the CBOE website at www.cboe.com/quotes, or anywhere that stock and option quotes are available. For more information about BXM and its use as a portfolio management tool, please click here: cboe.com