CBOE launches second in series of social media-based strategy benchmark indexes

Chicago Board Options Exchange (CBOE) announced that it has launched the CBOE-SMA Large-Cap Weekly Index (SMLCWSM Index), the second in a series of sentiment-based strategy benchmark indexes designed to capitalize on short-term market momentum based on Social Market Analytics’ (SMA) social media metrics.

The CBOE-SMLCW Index is reconstituted every Friday at 8:30 a.m. CT, representing a longer-duration portfolio than the CBOE-SMA Large-Cap Index (SMLC), which is reconstituted daily. CBOE launched the CBOE-SMA Large-Cap Index, the first of its sentiment-based benchmark indexes that measure market momentum based on SMA’s social media metrics, in August.

Similar to the first SMLC Index, the SMLC Weekly Index tracks the return of a hypothetical portfolio strategy designed to monetize the information in SMA S-Scores. SMA derives actionable signals that quantify market sentiment regarding stocks from social media data streams. S-Scores express rising or declining sentiment for different stocks.

The CBOE-SMLCW Index outperformed the cumulative returns for the S&P 500 Index on a one-month, year-to-date and one-year basis, according to a back-tested study of recent data, in part because the returns tend to be independent of bull or bear market cycles. The hypothetical SMLCW one-month return for the period between October 2014 and October 2016, for example, was 5.32%, compared with the S&P 500’s 3.42%, while the year-to-date return was 13.85% compared with the S&P 500’s 7.58%, and SMLCW’s one-year return stood at 9.88%, versus 5.69% for the S&P 500 Index.

The SMLCW Index portfolio comprises 25 equally weighted stocks drawn from the CBOE Large-Cap Universe – usually around 450 stocks – with the highest average 5-period SMA S-Scores.

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CBOE launches second in series of social media-based strategy benchmark indexes


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