Put-Write Index (PUT)¶

OVERVIEW¶

The CBOE S&P 500 PutWrite Index (ticker: PUT) is a benchmark index that measures the performance of a hypothetical portfolio that sells at-the-money (ATM) S&P 500 index put options on a monthly basis and fully collateralizes them with 1-month Treasury bills.

The index captures returns generated by collecting options premiums and earning interest on cash, offset by losses incurred when the S&P 500 declines. It represents the risk-return profile of a mechanically executed short-put strategy and serves as a direct comparison benchmark for institutional covered call and put-selling programs.

Note

The PUT index is passive and rules-based. It removes all manager discretion from the equation, making it a clean baseline for evaluating systematic cash-secured put strategies.

HOW IT IS CALCULATED¶

The PUT index assumes the sale of one ATM S&P 500 put option on the third Friday of every month, aligned to the standard monthly expiration cycle. The option is held to expiration and settles against the SPX settlement value.

Monthly Return Formula

Monthly Return = Premium Collected + Treasury Yield − Option Payout

Component	Description
Premium Collected	Price received for selling the ATM put at the start of the month
Treasury Yield	Return on 1-month T-bills held as collateral for the contract duration
Option Payout	Max(0, Strike Price − SPX Settlement Price) × 100

If the SPX closes above the strike at expiration, the payout is zero and the index retains the full premium plus the T-bill yield.
If the SPX closes below the strike, the index absorbs the intrinsic loss.

WORKED EXAMPLE¶

Assume the SPX is trading at 5,000 on the third Friday of the month.

The PUT index sells an ATM put at the 5,000 strike for a premium of $40.00 ($4,000 per contract).
The portfolio simultaneously buys $100,000 in 1-month T-bills yielding 0.4% annually (~0.033% monthly).

Scenario	SPX at Expiration	Put Payout	Net Options P&L	Index Result
Put expires worthless	5,050	$0.00	+$40.00	Positive (premium + T-bill yield)
Put expires in-the-money	4,920	$80.00	−$40.00	Negative (net loss + T-bill yield)

Tip

In the in-the-money scenario, the premium collected was $40 against an $80 payout. The net options loss is $40, demonstrating the asymmetric risk inherent in short options positions.

HOW TO USE¶

Tapeboard surfaces the PUT index as a reference benchmark when analyzing short-put strategies. Use it to:

Benchmark systematic strategies — Compare your own cash-secured put program against the passive PUT index on a risk-adjusted basis.
Measure the Volatility Risk Premium — When the PUT index outperforms the S&P 500 on a risk-adjusted basis, it signals that option premiums were inflated relative to realized downside movement.
Evaluate manager alpha — Because the index strips out discretion, any outperformance relative to PUT reflects skill in timing, sizing, or rolling.

Note

Quantitative portfolio managers use the PUT index specifically to isolate the Volatility Risk Premium on the short-put side of the options market.

LIMITATIONS AND COMMON MISCONCEPTIONS¶

Limitation	Detail
No transaction costs	The index ignores bid-ask spreads, commissions, and margin requirements — significant frictions for retail traders.
Fixed position sizing	Assumes exactly one ATM put per month; excludes dynamic sizing or rolling techniques used by real managers.
No downside protection	Despite being fully cash-collateralized, the short-put strategy carries the same downside exposure as owning the S&P 500 outright.

Warning

A common misconception is that the PUT index represents a low-risk strategy because it is cash-collateralized. In a severe market crash, the PUT index will suffer substantial drawdowns. The premium collected provides only marginal outperformance versus the SPX itself — it does not eliminate downside risk.