Cboe Russell 2000 One-Week PutWrite Index^SM

 The Cboe Russell 2000 One-Week PutWrite Index^SM tracks the value of a hypothetical portfolio of securities (WPTR portfolio) that yields a buffered exposure to Russell 2000^® stock returns.  The WPTR portfolio  is composed of  Treasury bills and of a position in a one-week at-the-money put option on the Russell 2000 index  (RUT  put). The WPTR  portfolio is rebalanced weekly, typically on Fridays after  the expiration of weekly RUT options. SPX weekly options expire at the close, except on the third Friday of the month, when they expire at 11 am ET. A new one-week SPX put is then sold. 

Resources

• Cboe PutWrite Indices Methodology
• WPTR Historical Price Data

Cash-Secured PutWrite Strategy

Goals

Goals of cash-secured index putwrite strategies may include: (1) improve income from a cash or cash equivalent holding, and (2) receive upfront premium income in exchange for potential drawdown.

Strategy

To implement an index cash-secured putwrite strategy: (1) sell index put options, and (2) hold cash or cash equivalents (e.g., Treasury bills) to fully collateralize the short options position, in an amount equal to the maximum possible loss of the short put position.

Comments

The strategy (1) is often used to boost income from a holding of Treasury bills, (2) usually has a lower risk than a related stock index, (3) tends to outperform a related stock index when the stock markets are in range-bound or bearish regimes, (e.g., in 2008 and 2022), and underperform in bull market regimes (from 2012 to 2014, and in 2019).