Cboe S&P 500 95-110 Collar Index (CLL)

The Cboe S&P 500 95-10 Collar Index^SM (CLL) is based on a collar strategy. An option collar spread is designed to reduce the cost of hedging negative stock returns.  The CLL tracks the value of a portfolio that protects an investment in S&P 500 stocks with  a long  5 % out-of-the money put option on the S&P 500 (SPX put). The premium of the put is partly defrayed by  the premium collected on  a short position in a 10% out-of-the-money SPX  call option (SPX call).

The CLL Index  portfolio is rebalanced monthly after  the expiration of SPX call and put, typically 11 am ET every  third Friday. New SPX put and call options are then bought and sold respectively.

Resources

• Cboe S&P 500 95-110 Collar Index Description
• CLL Historical Price Data

Collar Strategy

Goals

The goal of the index options collar strategy is to provide a floor for the downside risk for a portfolio of stocks, and reduce net out-of-pocket hedging costs, in exchange for an upside cap.

Strategy

To implement an index collar strategy: (1) buy or hold a portfolio of stocks, (2) buy out-of-the-money index protective put options to hedge the portfolio, and (3) sell out-of-the-money index covered calls with the same expiration as the index puts.

Comments

The premium income received from the sale of the calls can help offset the cost of the index puts. The long index puts establish a downside floor, the short index calls establish an upside ceiling or cap, and the position is collared between the floor and the ceiling.