Chicago Board Options Exchange (CBOE) announced today that it has just launched the CBOE-SMA Large-Cap Weekly Index (SMLCWSM Index), the second in a series of sentiment-based strategy benchmark indices designed to capitalise on short-term market momentum based on Social Market Analytics’ (SMA) social media metrics.
SMA is a Chicago-based data analytics firm which provides institutional investors with real-time predictive social media quantitative data analytics across equities, exchange-traded derivatives, FX and ETFs.
The CBOE-SMLCW Index is reconstituted every Friday and represents 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, back in August.
Second in Series
In a similar way to the first SMLC Index, the SMLC Weekly Index tracks the return of a hypothetical portfolio strategy designed to monetise 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 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. Stocks in this universe are in the top 15 percent capitalisation tranche of stocks that are the underlyings for options listed on the CBOE (approximately 3,000 stocks) and have a market capitalisation greater than or equal to $10 billion. The Large-Cap Universe is reconstituted quarterly on the third Friday of the month.
According to a back-tested study of recent data, 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, partly because the returns tend to be independent of bull or bear market cycles.
CBOE entered into an exclusive licensing agreement with SMA to develop a series of sentiment-based strategy benchmark indices back in May 2016.