S&P 500 Annual Dividend Index Options

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The Chicago Board Options Exchange (CBOE) began trading options on the S&P 500® Annual Dividend Index (ticker symbol - DIVD) on May 25, 2010. Initially, two annual expirations - December 2010 and December 2011 - were be listed for trading.

This was the second CBOE-exclusive dividend index option introduced by the Exchange. On March 5, CBOE began trading in S&P 500 Quarterly Dividend Index options (ticker symbol - DVS) with a quarterly "accrual period," for market users with quarterly dividend exposures. DVS was the first contract of its kind in the U.S.

The S&P 500 Annual Dividend Index options contract was designed for customers who are accustomed to looking at dividend movements over an entire year, versus on a quarter-by-quarter basis. Further, dividend index contracts created in Europe in recent years are also based on an annual accrual period.

S&P 500 Annual Dividend Index options contracts provide direct exposure to the dividend risk of the S&P 500 index. The option allow investors to capture the difference between forward implied dividends, the market's best estimate of future dividend payments, and realized dividends - the dividends that are actually paid over those periods.

The dividend index, calculated by Standard & Poor's, reflects ordinary cash dividends for corporations comprising the S&P 500 Index over either an annual accrual period. It is calculated using the same set of component securities, same shares outstanding, same capitalization-weighting methodology and same index divisor as are used to calculate the S&P 500 Index.

For DIVD, the annual accrual period runs from the business day after the December expiration through the December expiration one year later. At the end of the each accrual period, the Index is reset to zero, and a new accrual period begins.

For additional information on S&P 500 Annual Dividend Index options, including contract specifications, price charts, ticker symbols and frequently-asked questions, see www.cboe.com/DIVD.


"How S&P 500® Dividend Index Options Could Pay Dividends for Stock Portfolios [1] -- social media release, David Blitzer, Standard and Poor's, and William Speth, CBOE, March 8, 2010)