Wilshire Cboe Global Option Writing Strategies

HISTORICAL ANALYSIS: CBOE OPTION INDICES
Global Option-Writing Strategies to

Reduce Risk and Enhance Income
July | 2020
Cboe S&P 500 30-Delta BuyWrite Index (BXMDSM) Exhibit 1 – Annualized Risk Return Analysis
Cboe S&P 500 PutWrite Index (PUTSM) (March 31, 2006 – March 31, 2020)
Cboe Russell 2000 PutWrite Index (PUTRSM) 8%
Cboe MSCI EAFE PutWrite Index (PXEASM) S&P 500
Cboe MSCI Emerging Markets PutWrite Index (PXEFSM) 6%

BXMD
Global Option-Writing Strategy
(30% BXMD, 30% PUT, 10% PUTR, 15% PXEA, and 15% PXEF) PUT PXEF MSCI ACWI Russell 2000
4%
Return
This study analyzes the effectiveness of global option-writing strategies Cboe Global PUTR MSCI Emerging
by exploring fourteen years (March 31, 2006 to March 31, 2020) of Option Strategy Markets
performance of five Cboe indices that sell one-month options on one of 2%
these stock indices: S&P 500®, Russell 2000®, MSCI EAFE® or MSCI MSCI EAFE
Emerging Markets Index®. The study also analyzes the performance of a
theoretical strategy that combines a mix of the Cboe indices to represent PXEA
0%
a new Global Option-Writing Strategy. 10% 14% 18% 22%
Standard Deviation
Option-Selling Index Strategies Source: Wilshire Associates, Cboe, Bloomberg
Option-selling index strategies provide investors with compensation, or Exhibit 1: The five option-selling indices all had less volatility than
income premiums, that can help provide downside cushion during a their related stock indices. The Global Option-Writing Strategy
market turn, while limiting upside potential. These strategies are showed a significant reduction in risk versus the global MSCI All
expected to demonstrate better diversification, managed tail risk and Country World Index (ACWI), 12.2% versus 16% respectively, while
consistent receipt of the implied volatility risk premium, or experiencing a small reduction in returns, from 4.3% for MSCI ACWI
compensation for protection against unexpected market volatility. to 3.9% for the Global Option-Writing Strategy.
Executive Summary: Key Findings Exhibit 2 – Maximum Drawdown and Standard Deviation
(March 31, 2006 - March 31, 2020)
Improved Tail Risk and Lower Volatility. All five Cboe Indices had lower
volatility and less severe drawdowns than their underlying market -32.7% PUT 11.3%
indices. The Global Option-Writing Strategy had a 24% lower standard
deviation and 34% less severe drawdown than the MSCI ACWI (Exhibit 2). -36.1% Global Strategy
Global Option-Writing Strategy 12.2%
Comparable Risk-Adjusted Returns. A global diversified option strategy

-42.7% BXMD 13.0%
had similar Sharpe and Sortino ratios to the broad global market,
confirming downside cushioning with some upside cost. Sharpe Ratio for
-50.9% S&P 500 14.7%
the Global Option-Writing Strategy was similar to MSCI ACWI (Exhibit 8).
Richly Priced Options Premiums Harvested. The Cboe Indices sold index -54.9% MSCI ACWI 16.0%
options and collected monthly premiums. Average gross monthly
premiums were higher for indices that sold at-the-money options (e.g., -61.6% MSCI EM 21.8%
2.25% and 2.17% for the BXEF and BXR Indices, respectively) versus
0%
indices that sold out-of-the-money options (e.g., 0.8% for the BXY Index). -70% -50% -30% -10% 10%
Options on all four stock indices were richly priced, as the average implied Maximum Drawdown Standard Deviation
volatility was greater than the average subsequent realized volatility by Source: Wilshire Associates, Cboe, Bloomberg
2.8 to 8.4 volatility points (Exhibits 13 & 14).
Exhibit 2: Stock indices demonstrated steepest drawdowns and
Lowers Efficient Frontier Risk. 15% additional allocation of a Global highest standard deviations. The Cboe S&P 500 PutWrite Index (PUT)
Option-Writing Strategy to global stock and bond portfolios reduced had the least severe maximum drawdown of 32.7% and lowest
standard deviation by at least 53 and as much as 72 basis points, giving standard deviation of 11.3%, followed closely by the Global Option-
back just 6 basis points in return (Exhibits 1 & 11). Writing Strategy. In combination, all option strategy indices performed
as designed - they consistently provided a cushion during challenging
markets versus individual and global stock markets.
All indices in this paper’s exhibits (except the VIX, RVX, VXEEM and VXEFA Indices) are total return indices (pre-tax indices that include reinvested dividends).
Past performance is not predictive of future returns. Please read full disclosures on the last page of this paper. Cboe Exchange, Inc. provided funding for this study.
WILSHIRE ASSOCIATES | wilshire.com 1

1299 Ocean Avenue, Suite 700, Santa Monica, CA 90401 Tel 310.451.3051 Fax 310.458.0520
Global Option-Writing Strategies to Reduce Risk
July | 2020
Exhibit 3 – Index Descriptions
TICKER INDEX POSITIONS HELD
BXMDSM Cboe S&P 500 30-Delta BuyWrite Index Sell 1-mo. out-of-the-money (OTM) SPX call options & hold SPX stocks
PUTSM Cboe S&P 500 PutWrite Index Sell 1-mo. at-the-money (ATM) SPX put options + hold US Treasury bills
PUTRSM Cboe Russell 2000 PutWrite Index Hold U.S. Treasury Bills + Sell 1-mo. at-the-money RUT put options
PXEASM Cboe MSCI EAFE PutWrite Index Sell 1-mo. ATM MSCI EAFE put options + hold U.S. Treasury Bills
PXEFSM Cboe MSCI Emerging Markets PutWrite Index Sell 1-mo. ATM MSCI EM put options + hold U.S. Treasury Bills
Global Option-Writing Strategy 25% BXMD, 25% PUT, 10% PUTR, 20% PXEA, and 20% PXEF
Exhibit 4 – Market Regime Analysis (Annualized Returns*)

(March 31, 2006 – March 31, 2020)
80%
61.3%
53.5%
60%
37.7%
35.8%
35.2%
34.6%
32.3%
*February 19, 2020 –

28.8%
26.2%
26.0%
24.0%
40%
23.2%
22.6%
March 23, 2020

19.6%
19.0%
16.6%
16.0%
15.9%
13.1%
12.6%
12.4%
20%
returns are
nominalized.
0%
In two down market regimes,
-7.4%
-7.5%
-7.7%
-20%
BXMD, PUT and the
-10.4%
-15.4%
-19.4%
Global Option-Writing
-22.8%
-24.8%
-27.2%
-28.9%
-40%
-30.6%
-31.2%
Strategy demonstrated less
-32.3%
-32.7%
-33.6%
-33.8%
-34.2%
-41.4%
severe drawdowns than

-45.0%
-46.6%
-60%
-51.2%
the market indices.

-80%
Aug-2006 - Oct-2007 Nov-2007 - Feb-2009 Mar-2009 - Apr-2011 Feb-2016 - Jan-2018 Feb-2018 -Dec 2018 Feb.19-2020- Mar.23-2020
Global Option-Writing Strategy BXMD PUT S&P 500 MSCI ACWI MSCI EAFE MSCI EM
Source: Wilshire Associates, Cboe, Bloomberg
Exhibit 4: Select bull and bear market regime concentrations confirmed that all Cboe option-selling indices performed as expected, demonstrating
less severe drawdowns in down markets and lower returns in up markets than did the market indices during the same periods analyzed. Drawdowns
for Global Option-Writing Strategy were 16.8 percentage points less severe than for MSCI ACWI during the first bear market regime and 6.7
percentage points less severe during the second bear market. The Cboe BXMD Index had the strongest returns of all three options strategies during
each bull market period, as the BXMD writes out-of-the-money options and can participate in some upside stock market moves.
All indices in this paper’s exhibits (except the VIX, VXEEM and VXEFA Indices) are total return indices (pre-tax indices that include reinvested dividends).

July | 2020
Exhibit 5 – Growth in the Value of $1 Over 14 Years Exhibit 6 – Growth in the Value of $1 Over 34 Years
(March 31, 2006 – March 31, 2020) (June 30, 1986 – March 31, 2020)
$4 $35
$3 $30 Across a 34 year time period,

$2.68  S&P 500 BXMD outperformed
$3 $2.18  BXMD $25
the S&P500 and $23.02  BXMD
$1.86  PUT
$2 $1.79  MSCI ACWI $20
Russell 2000. $22.05  S&P 500
$17.42  PUT
$1.70  Global Option-
$2 $12.33  Russell 2000
Writing Strategy $15
$6.19  MSCI EAFE
$1.50  MSCI EM
$1 $10
$1
$5
$0
$0
Mar-2006
Mar-2007
Mar-2008
Mar-2009
Mar-2010
Mar-2011
Mar-2012
Mar-2013
Mar-2014
Mar-2015
Mar-2016
Mar-2017
Mar-2018
Mar-2019
Mar-2020
Source: Wilshire Associates, Cboe Source: Wilshire Associates, Cboe, Bloomberg
Exhibit 5: During an unprecedented U.S. equity bull market and 2020 Exhibit 6: During the 34 year time period, the Cboe S&P 500 30-Delta
COVID-19 drop, the S&P 500 Index and two S&P 500 related options BuyWrite Index (BXMD) with annualized returns of 10%, generated
indices outperformed select global strategies. The Cboe S&P 500 30-Delta more growth than all other indices in the chart above, including the
BuyWrite Index, with less downside cushion and more upside protection underlying S&P Index. The BXMD Index collected lesser amounts of
than other options strategies in the chart above, had an annualized monthly premiums and had larger equity upside participation than did
return of 5.7%, higher than other options strategies and non-US indices Cboe indices that wrote at-the-money options.
in the chart above.
Exhibit 7 – Relative Annual Performance Analysis for Option-Writing and Market Indices
(January 1, 2007 – March 31, 2020)
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020
Cboe S&P 500 30-Delta BuyWrite Index
6.2% -31.3% 32.1% 11.2% 7.3% 11.0% 19.1% 6.2% 4.0% 8.4% 16.1% -5.4% 23.0% -20.8%
(BXMD)
Cboe S&P 500 PutWrite Index (PUT) 9.5% -26.8% 31.5% 9.0% 6.2% 8.1% 12.3% 6.4% 6.4% 7.8% 10.8% -5.9% 13.5% -20.7%
Cboe Russell 2000 PutWrite Index

16.1% -28.5% 34.3% 13.8% 6.1% 10.4% 12.0% 3.9% 4.9% 8.6% 7.7% -10.0% 14.5% -30.2%
(PUTR)
Cboe MSCI EAFE PutWrite Index (PXEA) 8.0% -31.3% 22.8% 8.4% 6.5% 11.6% 7.6% -3.2% 0.8% 3.9% 11.3% -10.7% 5.5% -27.1%
Cboe MSCI Emerging Markets

24.2% -29.5% 54.0% 19.6% 8.6% 13.6% -1.5% 4.0% -13.1% -2.4% 17.6% -1.6% 1.7% -24.1%
PutWrite Index (PXEF)
S&P 500® Index 5.5% -37.0% 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% 1.4% 12.0% 21.8% -4.4% 31.5% -19.6%
Russell 2000® Index -1.6% -33.8% 27.2% 26.9% -4.2% 16.3% 38.8% 4.9% -4.4% 21.3% 14.6% -11.0% 25.5% -30.6%
MSCI EAFE® Index (US$) 11.2% -43.4% 31.8% 7.8% -12.1% 17.3% 22.8% -4.9% -0.8% 1.0% 25.0% -13.8% 22.0% -22.8%
MSCI Emerging Markets Index (US$) 39.4% -53.3% 78.5% 18.9% -18.4% 18.2% -2.6% -2.2% -14.9% 11.2% 37.3% -14.6% 18.4% -23.6%
MSCI ACWI Index (US$) 11.7% -42.2% 34.6% 12.7% -7.3% 16.1% 22.8% 4.2% -2.4% 7.9% 24.0% -9.4% 26.6% -21.4%
Lowest 1 2 3 4 5 6 7 8 9 10 Highest
Exhibit 7: The above heat map compares annual returns across 5 option-writing indices (a mix of equity and global underlying) and 5 market indices
(a mix of equity and global) from 2007 – 2019, as well as performance for the first quarter of 2020. Index returns for each year are ranked highest to
lowest (green to red) to help visualize relative annual performance across all 10 indices. In both 2008 and 2011, all five option-writing indices
outperformed all five market indices.

July | 2020
Exhibit 8 – Summary Statistics: 14 Indices Analyzed

(March 31, 2006 - March 31, 2020)
SORTINO RATIO
ANNUALIZED STANDARD MAXIMUM SHARPE RATIO
INDEX BETA ALPHA (MAR = 0.00%, SKEWNESS
RETURN DEVIATION DRAWDOWN (ANNUALIZED)
ANNUALIZED)
Global Option-Writing Strategy 3.9% 12.2% 0.69 0.80% -36.1% 0.48 0.16 -1.81
Cboe S&P 500 30-Delta BuyWrite Index (BXMD) 5.7% 13.0% 0.75 2.32% -42.7% 0.67 0.29 -1.13
Cboe S&P 500 PutWrite Index (PUT) 4.5% 11.3% 0.60 1.80% -32.7% 0.57 0.22 -1.91
Cboe S&P 500 BuyWrite Index (BXM) 3.4% 11.3% 0.61 0.65% -35.8% 0.43 0.12 -1.65
Cboe S&P 500 2% OTM BuyWrite Index (BXY) 5.7% 12.9% 0.74 2.34% -40.3% 0.78 0.29 -1.21
Cboe S&P 500 5% Put Protection Index (PPUT) 6.3% 11.1% 0.56 3.68% -38.9% 0.35 0.37 -0.56
Cboe Russell 2000 PutWrite Index (PUTR) 3.8% 15.3% 0.75 0.91% -38.1% 0.40 0.15 -2.15
Cboe MSCI EAFE PutWrite Index (PXEA) 0.3% 12.6% 0.67 -2.55% -38.4% 0.11 -0.12 -2.07
Cboe MSCI Emerging Markets PutWrite Index (PXEF) 3.8% 14.5% 0.72 0.92% -37.0% 0.43 0.15 -1.74
S&P 500® Index 7.3% 14.7% 0.88 3.30% -50.9% 0.78 0.38 -0.86
Russell 2000® Index 4.4% 19.7% 1.07 0.43% -52.9% 0.47 0.19 -0.75
MSCI ACWI Index (US$) 4.3% 16.0% 1.00 0.00% -54.9% 0.47 0.18 -0.85
MSCI EAFE® Index (US$) 1.7% 17.2% 1.05 -2.57% -56.7% 1.12 0.03 -0.72
MSCI Emerging Markets Index (US$) 2.9% 21.8% 1.22 -1.38% -61.6% 0.35 0.12 -0.50
* Rf =0.22% monthly
Exhibit 8: Summary statistics contrast eight options indices with the underlying S&P 500, Russell 2000, MSCI EAFE and MSCI Emerging Markets Indices,
global stock and bond benchmarks, as well as an option-selling strategy. Unlike other measures of risk, Alpha and Beta incorporate market measures
versus the broad, global MSCI ACWI. All Cboe options index strategies have better maximum drawdowns and lower standard deviations than their
underlying indices, with larger negative skewness (with the single exception of PPUT), as expected. PPUT demonstrated the highest risk-adjusted
returns and generated the most Alpha, at 3.68% versus MSCI ACWI.

July | 2020
Exhibit 9 – Beta Analysis Exhibit 10 – Alpha Analysis

(March 31, 2006 - March 31, 2020) (March 31, 2006 - March 31, 2020)
Cboe S&P 500 5% Put Protection Index (PPUT) 0.56 PPUT 3.68%
Cboe S&P 500 PutWrite Index (PUT) 0.60 PUT 1.80%
Cboe S&P BuyWrite Index (BXM) 0.61 BXM 0.65%
Cboe MSCI EAFE PutWrite Index (PXEA) 0.67 -2.55% PXEA
Global Option-Writing Strategy 0.69 Global Option-Writing Strategy 0.80%
Cboe MSCI Emerging Markets PutWrite Index (PXEF) 0.72 PXEF 0.92%
Cboe S&P 500 2% OTM BuyWrite Index (BXY) 0.74 BXY 2.34%
Cboe Russell 2000 PutWrite Index (PUTR) 0.75 PUTR 0.91%
Cboe S&P 500 30-Delta BuyWrite Index (BXMD) 0.75 BXMD 2.32%
S&P 500® Index 0.88 S&P 500 3.30%
MSCI ACWI Index 1.00 MSCI ACWI 0.00%
MSCI EAFE® Index 1.05 -2.57% MSCI EAFE
Russell 2000® Index 1.07 Russell 2000 0.43%
MSCI Emerging Markets Index 1.22 -1.38% MSCI EM
0 0.25 0.5 0.75 1 1.25 -3% -2% -1% 0% 1% 2% 3% 4%
Source: Wilshire Associates, Cboe, Bloomberg Source: Wilshire Associates, Cboe, Bloomberg.
* Rf =0.22% monthly * Rf =0.22% monthly
Exhibit 9: Lower positive Betas across all option-writing strategies, Exhibit 10: Alpha reflects the excess return on an investment, relative
consistent with lower measures of risk, versus the broad market to the return on the MSCI ACWI Index. Factors that helped increase
indices. Lower Betas for option-selling strategies may provide the Alphas for the option-writing strategies included the harvesting of
potential to achieve some diversification benefits for certain richly priced option premiums and mitigation of downside risk. Alpha
portfolios. Option-writing strategy Betas ranged from .56 to .75, with for the Global Option-Writing Strategy was 0.80%.
the Global Option-Writing Strategy at .69.
Exhibit 11 – Reducing Risk Mean Variance Efficient Frontier: Across a wide spectrum of robust risk and return
15% Global Options Allocation Added to 60/40 Global Portfolio metrics, this fourteen-year study demonstrates
(March 31, 2006 – March 31, 2020)
that global option-writing strategies, analyzed
4.3%
Without Global Option (MSCI ACWI + Global Agg Bond) through multiple, different lenses consistently:
4.2% 80% ACWI
60% ACWI 20% Bond • Reduced risk and lower Betas in exchange for
40% Bond
4.1% similar, comparable returns
Annualized Return
15% Global Option

20% ACWI 65% ACWI
4.0%
80% Bond 20% Bond • Provided downside cushion during
3.9%
15% Global Option
45% ACWI underperforming markets
40% Bond
3.8% 15% Global Option • Contributed positive Alpha, driven by the
5% ACWI
3.7%
80% Bond
With Global Option combined benefit of reduced risk and
5% 7% 9% 11% 13% 15% 17% consistently harvesting premiums
Annualized Standard Deviation
Exhibit 11: A 15% allocation to a Global Option-Writing Strategy within

a diversified global portfolio shows a reduced risk efficient frontier.
Funding the 15% global options allocation from global stocks lowers risk
across all global stock/bond combinations. While returns are reduced by
6 basis points, risk reduction ranges from 53 to 72 basis points across
global stock/bond allocations, from 80/20 to 20/80.

July | 2020
Investor Acceptance
Use of index options and other alternative investments has increased over the past two decades as investors seek to incorporate income
generating and diversification strategies. Key factors that institutional investors may consider when assessing new investment opportunities
include market capacity, the potential impact of market stress, and higher volatility on both capacity and liquidity. The charts in Exhibit 12 help
provide some answers to questions investors may consider when evaluating index options, with 19-year charts demonstrating the notional
daily value of SPX options, as well as three volatility indexes that quantify expectations of 30-day future volatility for insights into investor
sentiment.
Exhibit 12 – Market Capacity, Trading Volume and Volatility

(March 1, 2001 – March 31, 2020)
Notional Value of Average Daily Volume of S&P 500 (SPX) Options in $Billions
$600
Early 2020: Notional Daily Volume Surpassed $500 Billion $528
$495
$500
$400
$300 $264
$200 $154
$121
$100
$-
Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
Three Volatility Indices

-------- RVX
RVX℠ – Cboe
- Cboe Russell
Russell 2000Volatility
2000 VolatilityIndex
Index
$100
$90
------- VXEEM℠
VXEEM - –Cboe
CboeEmerging
EmergingMarkets
MarketsETF
ETFVolatility
Volatility Index 92.46
87.62
VIX® - Cboe Volatility Index® 87.62
$80
$70
$60
$50
$40
$30
$20
$10
$0
Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19 Mar-20
*Daily closing values

Source: Cboe, Bloomberg
Exhibit 12: Over the past two decades, notional value of daily SPX index option volume has steadily increased, more than doubling every five years.
Institutional investors often prefer to see instruments’ market capacity in the tens of billions of dollars. Volatility more than tripled in early 2020 during the
Covid-19 pandemic, and during the 2008 Financial Crisis. In the two charts above, we observe that in many periods when the volatility indices rose, notional
value of SPX options volume also jumped.

July | 2020
Mining Premiums & Lowering Risk

Option selling strategies focus on harvesting premiums, in exchange for the likelihood of truncated potential in certain market regimes. At-the-
money (ATM) strategies, such as PUT, PUTR, PXEA and PXEF focus on maximizing harvested premiums versus out-of-the-money (OTM) strategies,
such as BXMD. The premium size is a function of future expected volatility. Markets where expected volatility exceeds realized volatility create
premium pricing that is above average, or rich, and can fuel higher risk-adjusted returns. Exhibit 13 (below) shows rich premiums protracting due to
lower market volatility. Some asset classes are inherently more volatile, such as small-cap and emerging markets, versus large-cap and developed
markets. The tradeoff is between consistently higher premiums during a low-correlated, volatile market and lower premiums during a market that
is highly correlated with lower volatility. As shown in Exhibit 14 (further below), premiums between ATM and OTM strategies are highly correlated
and as expected, the ATM strategy delivered higher premiums.
Exhibit 13 – Implied Volatility Risk Premium

Data series for the four charts below begin in different years, end in March 2020, and demonstrate that implied volatility was usually higher than subsequent realized volatility.
120 120
Cboe Volatility Index® (VIX Index®) (avg. 19.3) CboeRussell

Cboe Russell 2000 Volatility
VolatilityIndex
Index(RVX℠)
(RVX(SM)) (avg.(avg.
23.5)23.5)
Subsequent 30-Day Realized Volatility of SPX Index (avg. 15.3) Subsequent 30-Day Realized
Subsequent RealizedVolatility
VolatilityofofRUT℠ IndexIndex
RUT(SM) (avg. (avg.
20.7)20.7)
90 90
Differential = Differential =
4 volatility points 2.2 volatility points
60 60
30 30
0 0
120 120
Cboe Cboe
Cboe Emerging Markets
MarketsETF
ETFVolatility
VolatilityIndex
Index(VXEEM℠)
(VXEEM(SM)
(avg.(avg.
22.8)22.8)
Cboe EFA
EAFEETF
ETFVolatility
VolatilityIndex
Index (VXEFA(SM)
(VXEFA℠) (avg.(avg. 21.4)
21.4)
Subsequent 30-Day Realized
Subsequent RealizedVolatility
VolatilityofofMSCI
MSCIEAFE®
EAFE®Index (avg.
Index 16.0)
(avg. 16.0) Subsequent 30-Day Realized
Subsequent 30-Day RealizedVolatility
VolatilityofofMSCI
MSCIEMEM Index
Index (avg.
(avg. 14.4)
14.4)
90 90
Differential =
Differential =
5.4 volatility points
60
8.4 volatility points
60
30
30
0
0
Source: Wilshire Associates, Cboe
Exhibit 13: The averages of the daily closing values of the Cboe Volatility Index (VIX), Cboe Russell 2000 Volatility Index (RVX), Cboe EAFE ETF
Volatility Index (VXEFA) and Cboe Emerging Markets ETF Volatility Index (VXEEM) were above subsequent realized volatility of the S&P 500,
Russell 2000, MSCI EAFE and Emerging Markets by a nominal 4.0, 2.8, 5.4 and 8.4 volatility points, respectively.

July | 2020
Exhibit 14 – U.S. and International Monthly Gross Premiums for BXR, BXM, BXY and BXEF, BXEA, BYEF
(May 2006 – March 2020)
12%
 BXR Cboe Russell 2000 BuyWrite Index (average = 2.2%)
● BXM Cboe S&P 500 BuyWrite Index (average = 1.7%)
10%
 BXY Cboe S&P 500 2% OTM BuyWrite Index (average = 0.8%)
8%
6%
4%
2%
0%
May-2006 Sep-2007 Feb-2009 Jun-2010 Nov-2011 Mar-2013 Jul-2014 Dec-2015 Apr-2017 Sep-2018 Jan-2020
12%
10%
 BXEF Cboe MSCI Emerging Markets BuyWrite Index (average = 2.3%)
● BXEA Cboe MSCI EAFE BuyWrite Index (average = 1.5%)
8%  BYEF Cboe MSCI Emerging Markets 2% OTM BuyWrite Index (average = 1.4%)
6%
4%
2%
0%
May-2006 Sep-2007 Feb-2009 Jun-2010 Nov-2011 Mar-2013 Jul-2014 Dec-2015 Apr-2017 Sep-2018 Jan-2020
Source: Wilshire Associates, Cboe
Exhibit 14: The two charts above show four indices that write at-the-money options (BXR, BXM, BXEF and BXEA) and two indices that write out-of-the-
money options (BXY and BYEF). The two indices that collected the most premiums were the BXR and BXEF indices, because they wrote ATM monthly
options on indices (the Russell 2000 and MSCI EM) that were more volatile than the S&P 500 and MSCI EAFE indices. The two indices that collected
the lowest amount of gross premiums were BXY and BXEF indices that wrote OTM options. An advantage of OTM versus ATM option-writing is the
fact that an OTM option writer has the potential to participate in some upside moves in the stock market. Exhibit 8 shows that the BXY and BXMD
indices (OTM writing) had higher returns than the BXM and PUT indices (ATM writing) over a 14-year period.
Conclusion
Empirical data across 14 years confirmed that Cboe option-writing indices and a theoretically designed Global Option-Writing Strategy delivered
reduced risk and consistently captured the volatility risk premium. The Global Option-Writing Strategy offered similar risk adjusted returns to the MSCI
ACWI, fueled by richly priced individual index options and expected volatility landing higher than subsequent realized volatility. The combination of
these factors delivered realized drawdown cushion as designed. The richest average monthly call premiums for BXR and BXEF, at 2.17% and 2.25% of
the underlying value, respectively, contributed at a rate of 29.4% and 30.6% respectively, on an annualized basis from May 2006 to March 2020.
Overall, the combination of lower risk, drawdown cushion, demonstrated diversification benefits, and increased investor acceptance indicate that
global option-writing strategies are worth further consideration as part of a long-term investment plan.
Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (ODD).
Copies of the ODD are available from your broker or from The Options Clearing Corporation, 125 S. Franklin Street, Suite 1200, Chicago, IL 60606. The information in this paper is
provided solely for general education and information purposes and therefore should not be considered complete, precise, or current. Cboe® and VIX® are registered trademarks of,
and BXMD, PUT, PUTR, PXEA, PXEF, RVX, VXEEM, VXEFA, and many other indexes are servicemarks of Cboe Options Exchange (Cboe). S&P® and S&P 500® are trade names or
trademarks of Standard & Poor's Financial Services, LLC. Russell 2000® is a registered trademark of the Frank Russell Company, used under license. MSCI, and the MSCI index names
are service marks of MSCI Inc. ("MSCI") or its affiliates and have been licensed for use by Cboe Exchange, Inc. Option contracts on any MSCI index ("Index Contracts") are not
sponsored, guaranteed or endorsed by MSCI, its affiliates or other parties involved in, or related to, making or compiling such MSCI index. Cboe Exchange, Inc. provided funding for
this study. This paper is intended for financial professionals only. This paper is not intended for the general public. Copyright © Wilshire Associates 2020. All Rights Reserved.


Wilshire Cboe Global Option Writing Strategies

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Wilshire Cboe Global Option Writing Strategies

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HISTORICAL ANALYSIS: CBOE OPTION INDICES

Global Option-Writing Strategies to

Cboe MSCI Emerging Markets PutWrite Index (PXEFSM) 6%

Comparable Risk-Adjusted Returns. A global diversified option strategy

WILSHIRE ASSOCIATES | wilshire.com 1

Exhibit 3 – Index Descriptions

TICKER INDEX POSITIONS HELD

Exhibit 4 – Market Regime Analysis (Annualized Returns*)

*February 19, 2020 –

March 23, 2020

severe drawdowns than

the market indices.

Source: Wilshire Associates, Cboe, Bloomberg

WILSHIRE ASSOCIATES | wilshire.com 2

$3 $30 Across a 34 year time period,

Source: Wilshire Associates, Cboe Source: Wilshire Associates, Cboe, Bloomberg

Cboe Russell 2000 PutWrite Index

Cboe MSCI Emerging Markets

WILSHIRE ASSOCIATES | wilshire.com 3

Exhibit 8 – Summary Statistics: 14 Indices Analyzed

Source: Wilshire Associates, Cboe, Bloomberg

WILSHIRE ASSOCIATES | wilshire.com 4

Exhibit 9 – Beta Analysis Exhibit 10 – Alpha Analysis

0 0.25 0.5 0.75 1 1.25 -3% -2% -1% 0% 1% 2% 3% 4%

15% Global Option​

Exhibit 11: A 15% allocation to a Global Option-Writing Strategy within

WILSHIRE ASSOCIATES | wilshire.com 5

Exhibit 12 – Market Capacity, Trading Volume and Volatility

Three Volatility Indices

*Daily closing values

WILSHIRE ASSOCIATES | wilshire.com 6

Mining Premiums & Lowering Risk

Exhibit 13 – Implied Volatility Risk Premium

Cboe Volatility Index® (VIX Index®) (avg. 19.3) CboeRussell

Source: Wilshire Associates, Cboe

WILSHIRE ASSOCIATES | wilshire.com 7

WILSHIRE ASSOCIATES | wilshire.com 8

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15% Global Option