The BXM and PUT Benchmark Indices

Anyone selling covered calls or cash-secured puts on the S&P 500 eventually wants to know: is this strategy actually adding value, or would just holding the index have done as well? The CBOE built two benchmark indices to answer exactly that. The BXM (BuyWrite Index) simulates holding the S&P 500 and systematically selling a near-the-money one-month call against it every month, collecting the premium and rolling the position at each expiry. The PUT Index simulates the mirror strategy: selling a cash-secured at-the-money one-month put each month instead of owning the stock outright, collecting premium while holding enough cash to buy the index if assigned.

Both indices exist so that a fund manager running a real option-selling book has a rules-based, investable comparison rather than an ad hoc claim of "we generate income." Historically, both BXM and PUT have shown lower volatility than the S&P 500 itself, since the premium collected cushions small down-moves, but they also cap upside participation — a covered call gives away gains above the strike, and a cash-secured put simply doesn't own the stock's upside at all. In strong bull markets both benchmarks tend to lag the index; in flat or choppy markets they tend to outperform it, because premium income keeps accruing while the underlying goes nowhere.

The main use for a quant researcher is as a null hypothesis: before crediting an option-selling strategy with genuine skill, check whether it merely reproduces BXM or PUT with different strikes or tenors.