Cboe S&P 500 Zero-Cost Put Spread Collar Index (CLLZ)

The Cboe S&P 500 Zero-Cost Put Spread Collar Index^SM (CLLZ) is a variation of the Cboe S&P 500 Collar Index (CLL) that hedges negative S&P 500^® stock returns more selectively than the CLL  at zero upfront-cost. First, the long 5% SPX put in the CLL is replaced by  a less protective   2.5% - 5% put spread with a lower premium, Second an SPX call is sold with a strike such that the call premium offsets the cost of the put spread. The CLLZ   portfolio is rebalanced monthly after  the expiration of SPX options, typically 11 am ET every  third Friday. New SPX  options are then bought and sold.

Resources

• Cboe Zero-Cost Put Spread Collar Indices Methodology
• CLLZ Historical Price Data

Put Spread Collar Strategy

Goal

A goal of index put spread collar strategy often is the mitigation of some downside risk with a willingness to forgo some upside in bull markets.

Strategy

To implement an index put spread collar strategy, an investor usually (1) holds a portfolio of stocks, (2) buys out-of-the-money index protective puts options to hedge the portfolio, (3) sells out-of-the-money index covered calls with the same expiration as the index puts, and (4) sells index put options (at a strike below that of the long puts) to generate added premium income to help cover the hedging costs.

Comment

The additional premium received from the put sale may allow the raising of the strike price for the call and to therefore raise the upside cap.