BXM and BXY: The CBOE BuyWrite Indexes


BXM vs SPTR. Data from CBOE.com


In April 2002, the Chicago Board Options Exchange (CBOE) began publishing data for BXM, the BuyWrite Index. (This is the Official spelling; no hyphen).

The BXM is a benchmark index that measures returns of a hypothetical portfolio: Long Standard & Poor's 500 Index stocks and short S&P 500 Index call options (SPX) against the portfolio. 

NOTE: The following methodology is presented to illustrate how BXM works. Please do not copy this investment methodology.

In essence, BXM is a perpetual covered call on the S&P 500 Index, using at-the-money call options. 

BXM data is available (via download) from June 1, 1988, and the investment is based on the following strategy: 

  1. Buy and maintain ownership of a portfolio of stocks that exactly matches the S&P 500 Index.
  2. Write new  call options, expiration: 3rd Friday of next month. 
  • These are not weekly options. They always expire on the 3rd Friday and are cash-settled, based on the individual opening price of each stock in the S&P 500 Index. 
  • The new options are NOT sold at the opening of the market, so there is a short time each month when the portfolio is not hedged (making it not quite a perpetual buy-write).

3. The strike price is always just above the current index level (the first out-of-the-money call option). in other words, it is out of the money by $0.01 to $4.99.

4. The call is held through expiration and is cash settled (i.e., no shares change hands). No position adjustments are allowed.

5. Every month, a new one-month call option is written, based on the identical strategy.

6. Dividends and premium collected are reinvested into the stock portfolio

Reminder this is a theoretical portfolio. It is impractical to own this portfolio and copy the methodology)

Is BXM Attractive as an Investment? 

It should be -- for most investors. When the performance of BXM is compared with SPTR, the Standard & Poor’s Total Return Index (SPTR includes periodic reinvestment of all dividends), the data shows that the option-writing strategy performed on a par with the Total Return Index during most of the 25 years for which data is available.

Reinvesting dividends has been a powerful factor for investors. Being able to match a dividends-reinvested portfolio is very impressive. (See data below, comparing SPX with SPTR.)

However, the BXM portfolio was less volatile (its value changed by less) and that provides comfort for conservative investors. Reduced volatility with equivalent returns seems very attractive.

A close examination of the data shows that SPTR easily out-performed BXM during the most bullish  years. This reinforces the notion that writing covered calls does limit profits. When the market is wildly bullish, covered call writing underperforms a simple buy-and-hold strategy. However, BXM out-performs under all other market conditions.

BXM is a good investment choice, but it does not excite aggressive investors who may be willing to accept a little additional risk when seeking higher returns.  


In March 2006, BXY was introduced.  The new index uses a very similar methodology, with one difference. It makes an accommodation for bullish traders. The call options are 2% out of the money instead of being at the money. The option premium is less, but it is possible for the BXY investor to earn extra money when the market is in an uptrend.

[When expiration (settlement) finds that the calls are in the money, settlement is based on that 2% higher strike price.]

This is a more aggressive index because it offers less protection against a market decline. The returns (so far) have been impressive, with BXY easily performing best in this group.

Comparative returns to date. Data is available at the CBOE website.

Investment Results

If you were able to invest $100.00 in each index on Jun 1, 1988, as of (latest data available from the CBOE) Jun 28, 2013, you would have:

  • SPTR: $1,052.09
  • BXM:  $ 946.00
  • BXY:  $1,270.64
  • SPX:  $  602.30 (no dividends reinvested)

Some traders pick their own individual stocks. Others buy index funds. These BuyWrite indexes are another way for passive investors to play the passive game. 

Investment Choices

I cannot recommend any specific way to invest in these indexes.

Some mutual funds are available, but sales loads are too high. A  number of funds adopt covered call writing, but do not attempt to mimic BXM performance. I see no reason to choose one of these when you want BXM performance.

New ETFs are always being created. Keep an eye out for one that suits your needs.