Definition
The term CBOE S&P 500 BuyWrite Index identifies a composite which monitors the overall performance of a hypothetical covered call plan between organizations inside the S&P 500. The CBOE S&P 500 BuyWrite Index is released and preserved by the Chicago Board Options Exchange (CBOE) under an arrangement with Standard & Poor’s.
Explanation
The CBOE S&P 500 BuyWrite Index (BXM) is intended to mimic the operation of a buy-write plan placed on the S&P 500. Additionally known as a covered telephone, a buy-write is a way in that the buyer purchases a portfolio of stocks (in such a instance the S&P 500) and sells call options over precisely the exact same “basket” of stocks. Buy-writes on average underperform stocks if their prices rise, and out perform stocks if their prices fall.
The CBOE S&P 500 BuyWrite Index is a passive indicator between purchasing stocks of organizations emerging from the S&P 500 (SPX) and the writing of a SPXSM telephone option. The SPXSM will generally perish in 1 month and also its physical exercise price is normally above the existing selling price of the indicator. First released in 2002, the CBOE S&P 500 BuyWrite Index trades under the emblem BXM.
