S&P GSCI Crude Oil Covered Call Index Methodology

Transcription

1 S&P GSCI Crude Oil Covered Call Index Mehodology July 2014 S&P Dow Jones Indices: Index Mehodology

2 Table of Conens Inroducion 3 Highlighs 3 The S&P GSCI Crude Oil Covered Call Index Mehodology 3 Definiions 4 Index Consrucion 5 Approaches 5 Index Calculaions 5 Index Mainenance 9 Rebalancing 9 Index Governance 10 Index Commiee 10 Index Policy 11 Announcemens 11 Index Disseminaion 12 Tickers 12 S&P Dow Jones Indices Conac Informaion 13 Index Managemen 13 Produc Managemen 13 Media Relaions 13 Clien Services 13 Disclaimer 14 S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 1

3 S&P Dow Jones Indices shall have no liabiliy, coningen or oherwise, o any person or eniy for he qualiy, accuracy, imeliness and/or compleeness of he informaion, he S&P GSCI or any daa included in his S&P GSCI Crude Oil Covered Call Index Mehodology, or for delays, omissions or inerrupions in he delivery of he S&P GSCI Crude Oil Covered Call or daa relaed hereo. S&P Dow Jones Indices makes no warrany, express or implied, as o he resuls o be obained by any person or eniy in connecion wih any use of he S&P GSCI, including bu no limied o he rading of or invesmens in producs based on or indexed or relaed o he S&P GSCI, any daa relaed hereo or any componens hereof. S&P Dow Jones Indices makes no express or implied warranies, and hereby expressly disclaims all warranies of merchanabiliy or finess for a paricular purpose or use wih respec o he informaion, he S&P GSCI or any daa relaed hereo. Wihou limiing any of he foregoing, in no even shall S&P Dow Jones Indices have any liabiliy for any special, puniive, indirec, or consequenial damages (including los profis), in connecion wih any use by any person of he S&P GSCI or any producs based on or indexed or relaed hereo, even if noified of he possibiliy of such damages. S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 2

4 Inroducion The S&P GSCI Crude Oil Covered Call Index seeks o simulae a covered call sraegy on he mos acive crude oil fuures conrac. This mehodology was creaed by S&P Dow Jones Indices o achieve he aforemenioned objecive of measuring he underlying ineres of each index governed by his mehodology documen. Any changes o or deviaions from his mehodology are made in he sole judgmen and discreion of S&P Dow Jones Indices so ha he index coninues o achieve is objecive. Highlighs A covered call sraegy is an income generaing sraegy ha is generally used in a neural o bullish marke environmen, where a slow and seady rise in marke prices is anicipaed. The S&P GSCI Crude Oil Covered Call index reflecs an invesmen in he rolling acive WTI Crude Oil fuures conrac raded on he NYMEX, an exchange owned by he CME group, and he sysemaic wriing (selling) of ou-of-he-money (OTM) calls on he same conrac. The index seeks o provide higher reurns han he S&P GSCI Crude Oil Index, wih lower volailiy, in mos marke environmens wih he excepion of when he crude oil fuures marke is rallying rapidly. The S&P GSCI Crude Oil Covered Call Index Mehodology This mehodology uses various erms and definiions from he S&P GSCI Index Mehodology, henceforh referred o as he S&P GSCI Mehodology. Where no specifically noed oherwise in his documen, he rules of he S&P GSCI Mehodology will prevail. Where he erms in his documen are also defined in he S&P GSCI Mehodology, he definiions in his documen prevail. S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 3

5 Definiions Call opion. A conrac beween a buyer and seller whereby he buyer acquires he righ, bu no he obligaion, o purchase a specific securiy a a fixed price on or before a specified dae. The seller of he call assumes he obligaion of delivering he securiy. Srike price. The price a which he underlying will be delivered in he even he opion is exercised. Volailiy. The degree o which he price of an underlying securiy ends o flucuae over ime. S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 4

6 Index Consrucion Approaches The S&P Crude Oil Covered Call Index is calculaed on a hypoheical porfolio consising of a long fuures posiion and a shor OTM call posiion, boh of which are rolled monhly. The fuures and opions roll over a five-day period, saring on he firs business day of each monh. Index Calculaions Calculaing he Toal Reurn of he Porfolio The index is calculaed based on he oal reurn of a hypoheical porfolio consising of a long fuures posiion and a shor OTM call. If i s no during a roll period, he reurn and he index value are calculaed as follows: R I = = I F F C 1 1 C 1 (1 + R 1 ) (1) where: R = Index reurn on day I = Index level on day F = Closing price of he fuures conrac on day F -1 = Closing price of he fuures conrac on day -1 C = Closing price of he call opion on day C -1 = Closing price of he call opion on day -1 Five Day Roll Crude oil fuures and opions are no held o mauriy. Insead, he long fuures and shor opions posiions roll o he nex monh over a five-day period, wih 20% being replaced every business day. The roll period is he firs five business days of each monh. The opion chosen o be rolled ino is always based on he same conrac monh as he fuures ha are being rolled ino. Wih he subsiuion of he roll during he 1 s hrough he 5 h business days for he S&P GSCI Covered Call index, he roll rules and procedures followed are hose as specified in he S&P GSCI Mehodology, secions VI.2(b), VI.2 (c) and VI.2 (d). S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 5

7 Table 1: Conracs Included in he S&P GSCI Crude Oil Covered Call index for 2009 Crude Oil Covered Call Fuures and Opions roll Schedule for 2009 Trading Commodiy Ticker Designaed Faciliy (Conrac) Conrac Expiraions during he Monh 1 Monh: CME / NYM Oil (WTI Crude) CL H9 J9 K9 M9 N9 Q9 U9 V9 X9 Z9 F0 G0 (1) Fuure and opion Monhs included in he Crude Oil Covered Call Index ha are rolled ino during he calendar monh, saring wih January Monh leer codes are shown in Table 2. Table 2: Monh Leer Codes Monh Leer Code January F February G March H April J May K June M July N Augus Q Sepember U Ocober V November X December Z Deermining he Srike of he Call Opion The index deermines he srike price of he call opion o be rolled ino based on he marke price level implied by he realized volailiy of he crude oil marke. Afer he close of he las rading day of each monh, he annualized realized volailiy of he pas 21 rading days of he S&P GSCI Crude Oil Spo Index is calculaed. The 21-day realized (hisorical) volailiy is calibraed wih he number of calendar days lef o expiraion in he opion conrac monh o be rolled ino. We denoe his as vol. r i = S S i i 1 1 r i = j= 0 r i j sdev = j= 0 ( r i j r i ) 2 (2) realized volailiy = sdev* 252 vol = realized volailiy* # calendar days o exp ire 365 where: S i = Closing price of he S&P GSCI Crude Oil Spo Index on he i h rading day S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 6

8 r i = Daily reurn of he S&P GSCI Crude Oil Spo Index on he i h rading day r = The 21-day average daily reurn of he S&P GSCI Crude Oil Spo Index on he i i h rading day The srike of he new call opion, K, is 1 vol above he close of he fuures conrac o be rolled ino on he las rading day of each monh. where: new K = F ( 1 vol) (3) + F new = Closing price of he fuures conrac o be rolled ino. If he calculaed srike price, K, falls beween wo opion srikes, he call opion ha is immediaely above K is chosen An example of srike deerminaion: Dae: April 30 h 2009 The index will begin rolling ino he July fuures and opions on May 1 s 2009 July crude oil fuures selemen price on April 30 h = $52.28/bbl 21-day hisoric volailiy of he S&P GSCI Spo Crude Oil Index on April 30 h = 54.73% Calendar days o opions expiraion on April 30 h = 48 days Targe srike = $52.28/bbl + (52.28 * 54.73% * sqr(48 / 365)) = $62.66/bbl On May 1 s, he index begins rolling ino a long posiion in he July fuures and a shor posiion in he July 63 calls. Five-Day Saggered Roll The roll period sars on he firs business day of each calendar monh. Wih each successive day, 20% of he expiring fuures and opions are replaced by he new conracs a he close and assumed official selemen prices. Exhibi 1 shows an example of he weighs of he wo mauriies. Exhibi 1: Five Day Roll Example Dae Roll Ou Weigh Roll In Weigh 5/29/ % 0% 6/1/ % % 6/2/ % % 6/3/ % % 6/4/ % % 6/5/ % % S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 7

9 The reurn of he porfolio and he index value are calculaed as follows: R W = W old 1 old 1 ( F ( F old old 1 C C old old 1 ) + W ) + W new 1 new 1 ( F ( F new new 1 C C new new 1 ) 1 ) (4) I = I 1 (1 + R ) where: W new = Weigh of he new fuures / opions F new = Closing price of he new fuures C new = Closing price of he new call opion W old = Weigh of he old fuures / opions F old = Closing price of he new fuures C old = Closing price of he old call opion S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 8

10 Index Mainenance Rebalancing Since he S&P GSCI Crude Oil Covered Call index is based on one underlying securiy, here are no periodic rebalancings. In calculaing he S&P Crude Oil Covered Call Index, fuures and opions are rolled on he firs five business days of each monh, excluding weekends and holidays. S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 9

11 Index Governance Index Commiee The S&P GSCI Commiee mainains he S&P Crude Oil Covered Call Index. The Index Commiee mees regularly. A each meeing, he Index Commiee reviews any significan marke evens. In addiion, he Index Commiee may revise index policy for iming of rebalancings or oher maers. S&P Dow Jones Indices considers informaion abou changes o is indices and relaed maers o be poenially marke moving and maerial. Therefore, all Index Commiee discussions are confidenial. For informaion on Qualiy Assurance and Inernal Reviews of Mehodology, please refer o S&P Dow Jones Indices Commodiies Indices Policies & Pracices documen locaed under he Resource Cener on our Web sie, S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 10

12 Index Policy Announcemens Announcemens of he daily index values are made afer he fuures marke close each day. Announcemens of he new call srike price o be rolled ino are made following he close of business on he las business day of each monh. The index is calculaed daily when he NYMEX, an exchange owned by he CME group, crude oil fuures and opions are open for official rading and official selemen prices are provided, excluding holidays and weekends. In siuaions where an exchange is forced o close early due o unforeseen evens, such as compuer or elecric power failures, weaher condiions or oher evens, S&P Dow Jones Indices will calculae he value of he index based on mos recen opion price published by he NYMEX, an exchange owned by he CME group. If an exchange fails o open due o unforeseen circumsances, S&P Dow Jones Indices may deermine no o publish he index for ha day. For informaion on Calculaions and Pricing Disrupions, Exper Judgmen, Daa Hierarchy and Unexpeced Exchange Closures, please refer o S&P Dow Jones Indices Commodiies Indices Policies & Pracices documen locaed under he Resource Cener on our Web sie, S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 11

13 Index Disseminaion Hisorical index reurns are available hrough S&P Dow Jones Indices index daa group for subscripion via FTP. Tickers Index Bloomberg Reuers S&P GSCI Crude Oil Covered Call Index Spo SPCLCL.SPCLCL S&P GSCI Crude Oil Covered Call Index SPCLCLP.SPCLCLP Excess Reurn S&P GSCI Crude Oil Covered Call Index Toal Reurn SPCLCLTR.SPCLCLTR S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 12

14 S&P Dow Jones Indices Conac Informaion Index Managemen David M. Blizer, Ph.D. Managing Direcor & Chairman of he Index Commiee Mark Berkenkopf Associae Direcor Produc Managemen Jodi Gunzberg Vice Presiden Marya Alsai-Morad Associae Direcor Media Relaions David Guarino Communicaions Clien Services Beijing Dubai Hong Kong London New York or Sydney Tokyo S&P Dow Jones Indices: S&P GSCI Crude Oil Covered Call Index Mehodology 13

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