Introducing: VegaX Bitcoin BuyWrite Index — VBXM
Bringing investors critical access to products that can enhance their returns is what drives us at VegaX. We are creating the next suite of indices and financial products needed to support the growth and development of the digital assets industry. Our determination to provide universal access to the global digital asset industry led us to develop and construct the VegaX Bitcoin BuyWrite Index (VBXM).
The VBXM has been performing very well lately. At the time of writing, it was up:
- 1.18% in the past 24 hours
- 1.60% in the past week
- 19.18% in the past month
At the time, the index had a value of 791.27. For a more complete picture of the index’s performance, view the following graph:
Introduction
VBXM aims to be the premier standardized benchmark for bitcoin covered calls. It represents the performance of a hypothetical buy-write strategy on bitcoin. VBXM is a total return chain index based on (1) buying a core physical position in bitcoin, and (2) “writing” (or selling) the near-term at-the-money bitcoin option. The bitcoin option written will have one month or less time remaining to expiration and have a mark-up of ~10% without breaching 15%. VBXM will deliver strong risk-adjusted returns for retail investors while providing a more accurate gauge for success of bitcoin options traders. It will also be the foundation for passive investment products to emerge that will help retail investors get exposure to bitcoin in a less volatile way.
Index Design
VBXM includes a hypothetical portfolio consisting of a long position in bitcoin while simultaneously writing one-month, at-the-money call options against bitcoin. The VBXM Index provides a benchmark measure of the total return performance of this hypothetical portfolio. The investor receives an upfront premium for the option and is then obligated to settle the difference if the bitcoin price rises above the strike price of the option at time of expiry. If the price does not rise above the strike price, then the option expires and the investor who sold the call retains the option premium. Investors trade upside potential for guaranteed immediate income. By owning the underlying asset, the maximum loss is limited to the initial investment. In the event of a flat market, investors retain their holding in bitcoin while receiving an upfront premium for writing the call option. This results in financial gain even if bitcoin does not increase in value. The call option premium received from writing the call options is functionally ‘re-invested’ in bitcoin.
VBXM will be calculated by using daily marked-to-market returns. The open options are multiplied by the close weighted bitcoin price daily to calculate the price adjusted value. VBXM assumes that a bitcoin position was purchased and a call option with less than 30 days until expiry was immediately sold. The calculation assumes the options are held until expiration and are cash-settled, at which time a new one-month (on the first of each month), at-the-money call is written. The call option is settled against the price of the bitcoin on the day of its expiry. The final settlement price of the call option at maturity is the greater of 0 and the difference between the price of bitcoin on the date of its expiry minus the strike price of the expiring call option. This methodology will serve as an appropriate benchmark for investors and asset managers who choose to employ more complex options strategies.
Subsequent to the settlement of the expiring call option, a new at-the-money call option expiring in the next month is then written at the first of each month. The long bitcoin position and the short call option component are held in equal notional amounts, i.e., the short position in the call option is “covered” by the long bitcoin position.
Once the strike price of the new call option has been identified, the new call option is sold at the arithmetic mean of the bid and ask price listed on the call option at the first of each month. This is calculated on the first of each month, but VBXM is updated daily because of its mark-to-market nature.
VBXM opens the door for retail investors to invest in the crypto-world.
As always, please reach out to us with questions, comments, and suggestions! info@vegaxholdings.com
VegaX Holdings: https://vegaxholdings.com/
VegaX Holdings is the “BlackRock” of the Crypto Asset Industry. We provide investors globally with one-stop access to sophisticated and secure crypto asset management. The asset management industry is the largest in the world representing more than $80 trillion dollars in investments through investment products like ETFs, mutual funds, and indices that outperform investments in individual stocks. VegaX is the first to create similar investment products for Crypto providing investors outperformance versus buying individual cryptocurrencies. On average, investors buying VegaX products make 30% more profit versus just holding Bitcoin.
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