Transcript No Slide Title

Introductory Information for Panel on
Improving Risk-Adjusted
Returns and Managing Volatility
with Options
FIA Expo, Nov. 5, 2003
By Matthew Moran
Vice President, Chicago Board Options Exchange®
(312) 786-7249; [email protected]
3,000,000
2,000,000
1,000,000
0
3,516,156
3,098,283
3,150,250
2,883,841
2,015,442
1,612,473
1,398,510
1,160,621
1,140,068
1,116,597
919,614
795,259
785,777
829,734
900,860
774,501
1,206,201
1,143,127
924,248
776,432
593,107
543,394
432,434
382,326
254,011
227,107
157,291
127,960
71,553
22,462
6,470
4,000,000
Avg. Daily Volume
U.S. Options Exchanges Avg. Daily Volume
5,000,000
Jan-Sep 2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
2
Volatility Indexes
End-of-week prices for four years
80
End-of-week prices
70
QQV
60
VXN
50
40
VXO
30
20
VIX
10
0
/
/1
10
/
/1
10
/
/1
10
/
/1
10
/
/1
10
03
02
01
00
99
3
4
BuyWrites Since 1988
The S&P 500 Total Return Index and BXM Index
from June 1988* – Sept. 2003
S&P 500
Annualized returns from
Jun. 1, 1988 to Sep. 30, 2003
600
S&P 500 11.5%
BXM 12.2%
BXM
300
0
Jun-03
Jun-02
Jun-01
Jun-00
Jun-99
Jun-98
Jun-97
Jun-96
Jun-95
Jun-94
Jun-93
Jun-92
Jun-91
Jun-90
Jun-89
Jun-88
Month-end prices (scaled so that both = 100
on inception date of June 1, 1988)
900
* June 1988 is the first month for daily prices for the SPTR and BXM indexes. The BXM Index is designed to represent
a hypothetical buy-write strategy. Like many passive indexes, the BXM Index does not take into account significant factors
such as transaction costs and taxes and, because of factors such as these, many or most investors should be expected
to underperform passive indexes. See Risk Disclosure at last slide for more information.
5
Asset Allocation and
Risk-adjusted Returns
(Fifteen Years June 1, 1988 – May 31, 2003)
Annualized Rate of Return
15%
X Nasdaq-100
BXM
S&P 500
Annualized Standard
Returns
Deviation
10%
X 30-yr Treasury Salom
X Corp Bonds Salo BIG
Russell 2000
X
5%
LIBOR
X
0%
0%
5%
10%
Standard Deviation
15%
MSCI EAFE
BXM
SPTR
SPX
DJX
OEX
RUY
NDX
12.2%
11.5%
8.9%
10.2%
9.3%
7.8%
13.6%
10.0%
14.9%
14.9%
15.1%
15.6%
18.6%
29.3%
MSCI EAFE
SBMMTB1
SBMMTB3
SBTSY5
SBTSY10
SBTSY30
SBBIG
0.7%
4.7%
5.1%
7.8%
8.4%
9.3%
8.7%
17.2%
0.5%
0.5%
4.4%
6.7%
9.8%
3.9%
6