Yield and Volatility – VPD is Up 13.8%, and Treasury Index is Down 10.8% Y-T-D By Matt Moran

A number of investors recently asked questions such as – What types of yield-based investments can enhance the returns for my portfolio in times of low interest rates? Can I use volatility and options strategies to help diversify my portfolios? Are bond safe, low-risk investments?

Below are lists of year-to-date returns* for indexes and exchange-traded products through July 31.


13.8%                   VPD – CBOE VIX Premium Strategy Index

13.2%                   VPN – CBOE Capped VIX Premium Strategy Index

12.3%                   VXTH – CBOE VIX Tail Hedge Index

10.5%                   BXY – CBOE S&P 500 2% OTM BuyWrite Index

6.5%                     PUT – CBOE S&P 500 PutWrite Index

6.2%                     BXM – CBOE S&P 500 BuyWrite Index

-2.3%                   Barclays Aggregate Index

-5.7%                   Citigroup 10-yr Treasury Index

-10.6%                Barclays Long-Term Treasury Index

-11.7%                 Citigroup 30-yr Treasury Index


7.0%                     BWV      iPath CBOE S&P 500 BuyWrite Index ETN

5.7%                     PBP        PowerShares S&P 500 BuyWrite Portfolio ETF

-2.3%                    AGG       iShares Barclays Aggregate Bond ETF

-6.4%                    TIP         iShares Barclays TIPS Bond ETF

-9.9%                    TLT         iShares Lehman 20+Year Treasury Bond Fund ETF


When I attended the annual conference of the CFA Institute in May 2012, a number of the speakers expressed concern that many individual investors were not aware of the risks in bond investing (after 3 decades with a tailwind of declining interest rates).

In a provocative March 22, 2012, op-ed piece in the Wall Street Journal entitled “What Does the Prudent Investor Do Now?” Professor Burton Malkiel wrote —

“At a yield of 2.25%, the 10-year U.S. Treasury is a sure loser. Stocks are a safer choice. Even if the inflation rate remains moderate, interest rates are likely to rise to more normal levels as the economy continues to recover. Investors with long memories should recall that over the entire period from the 1940s until 1980, bonds were a horrible place to be. Given the likely trends, U.S. Treasurys and high quality bonds are likely to be extremely poor investments and are very risky.”

The iShares Barclays 20+ Year Treasury Bond Fund ETF (TLT) has experienced a steep decline since May 1.



More investors now are exploring options and volatility-based products to help add yield and diversify portfolios. The BXM Index has generated gross monthly premiums of about 1.8% per month.  The BXY Index has generated higher returns and lower volatility than the S&P 500 Index over the past 25 years.  For more information and charts, please visit these websites –


* Sources for the returns above are Bloomberg and the Wall Street Journal.  Some of the numbers may be preliminary and not final official numbers.  CBOE does not recommend or endorse the funds listed above.  Please read closely any applicable disclaimers and prospectuses before investing.

The posts on this blog are opinions, not advice.
Please read our disclaimer for Indices.

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