The CBOE PUTW Index, or CBOE S&P 500 PutWrite Index, tracks a hypothetical investment strategy that systematically sells out-of-the-money S&P 500 Index (SPX) put options, holding a collateralized cash position. It aims to represent the returns generated from collecting option premiums.
Mechanism
The index strategy involves selling one-month SPX put options with a strike price approximately 5% below the current S&P 500 level, typically on a weekly or monthly basis. The premium received from selling these puts is added to the cash component of the portfolio. If the S&P 500 declines significantly and the put options expire in-the-money, the portfolio incurs losses, offset by previously collected premiums.
Methodology
This methodology aims to generate income through option premiums, reflecting a common yield-enhancement strategy employed by institutional investors. It offers a benchmark for collateralized put-selling, which is a foundational concept in options trading. Understanding its construction provides context for evaluating similar systematic premium collection strategies in crypto institutional options trading, where participants seek to generate yield or manage volatility within digital asset portfolios.
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