Strategies 2: The CBOE S&P 500 PutWrite Index

In this article the CBOE S&P 500 PutWrite Index is explained and what value the index might bring to you. In previous article the most basic theta strategy: option writing is explained. The CBOE S&P 500 PutWrite Index is an essential benchmark for those interested in employing put writing as a strategy. Now, let’s discover how this index can be utilized effectively to maximize your investment potential.

The CBOE S&P 500 PutWrite Index

The CBOE S&P 500 PutWrite Index is a unique and widely recognized measure of the performance of a strategy known as put writing. It represents the hypothetical returns that an investor could have achieved by writing a sequence of cash-secured put options on the S&P 500 Index. This index provides us with a benchmark against which we can evaluate the effectiveness of put writing as a strategy.

Understanding Put Writing

Before we dive deeper into the index, let’s recap the concept of put writing. Put writing involves selling put options on an underlying asset, such as the S&P 500 Index. By doing so, the writer of the put option collects a premium from the buyer. In return, the writer incurs the obligation to buy the underlying asset at a predetermined price (strike price) if the buyer chooses to exercise the option. For more information see article XX about selling options.

How the Index Works

The Index operates by selling put options on a monthly basis. The strike price for these put options is typically set at or slightly out of the money, meaning the strike price is below the current market price of the S&P 500 Index.

The put options sold by the index have a standardized maturity of one month. At the end of the month, these options expire, and the process is repeated with new options for the following month. This monthly rebalancing ensures that the index reflects the current market conditions and performance.

To manage risk, the index holds cash as collateral, also known as cash-secured assets. This cash collateral is set aside to ensure that the index has sufficient funds available to fulfill the obligation of buying the underlying asset if the put options are exercised. Typically, the cash collateral is held in low-risk and liquid assets such as short-term treasury bills or cash equivalents.

Benefits of Using the Index as a Benchmark

  1. Risk-Adjusted Returns: The index allows investors to evaluate the risk and reward trade-off associated with put writing strategies. By analyzing the performance of the index over time, investors can assess the risk-adjusted returns and potential benefits of implementing similar strategies.
  2. Comparative Analysis: Comparing your own put writing strategy to the performance of the index can provide valuable insights. It helps you understand how your strategy fares against a widely followed benchmark, allowing you to refine your approach and make informed investment decisions.
  3. Investment Tool: The index can serve as a valuable tool for constructing and managing a portfolio centered around put writing. Investors can use the index’s historical performance and characteristics as a guide to optimize their strategy and potentially enhance their overall investment outcomes.


The CBOE S&P 500 PutWrite Index is an essential benchmark for investors interested in put writing as a strategy. It provides a standardized measure of the hypothetical returns generated by systematically selling cash-secured puts on the S&P 500 Index and can be used as a benchmark index for your put selling strategy.


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