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I learned something interesting from Roger Nusbaum’s site, as I usually do.

The CBOE has created a Put Write Index, which you can see quoted at Yahoo Finance under ^PUT.

Here’s S&P’s description:

The new index, called the CBOE S&P 500 PutWrite Index (PUT) tracks the performance of a hypothetical investment strategy (PUT strategy) that overlays short S&P 500 puts over a money market account. The number of puts is set to collateralize the exposure to S&P 500 downturns. This design provides higher leverage than the BXM strategy, and it can also capture the potentially “rich” premia of S&P 500 put options documented in several academic studies. These studies have found that short option strategies, and especially short put strategies, appear to generate high risk-adjusted returns.

The ^BXM index is for Buy Write Index. Roger thinks this is another development in a larger trend that allows individual investors to use sophisticated investment products that were previously reserved for professionals. I think he’s exactly right. This is what the future will look like.

Posted by edelfenbein at June 27, 2007 10:09 AM