That index creates a collar by buying a put that has a strike price nearest to being 95% of the value of the index, (or 5% out of the money) and selling a call option that is 110% the value of the index (or 10% OTM). This works for many investors because they prefer writing OTM calls on a stock portfolio.
I was hoping to see the CBOE S&P 500 95-100 Collar Index (the call written is ATM) to allow a direct comparison with the BXM, the CBOE Buy-Write Index. I've been posting comments on a bunch of personal finance blogs whenever I felt that such a comment was appropriate. Those comments recommend adopting the collar strategy, instead of relying on asset allocation methods to protect portfolio value.
Alas, the 95-110 collar is costly, and significantly under-performs both the S&P 500 and BXM – most of the time. When the markets fall however, the Collar Index (CLL) performs very well. Convincing passive investors to consider learning to use collars is not an easy task in itself, but it would be easier if the CBOE's chosen collar index performed better. Hence my desire to see the CLL index based on collecting the additional option premium available by selling ATM calls, rather than 10% OTM calls.
I'm hoping the CBOE will eventually publish the 95-100 Collar Index. It would provide valuable information by telling investors the cost of protecting a BXM portfolio with 5% OTM puts.