The Chicago Board Options Exchange announced this week that it has created a family of 12 new sector indexes, called “PowerPacks.” Both options and futures on all 12 PowerPacks indexes will launch on July 8, 2005.
CBOE designed the new family of sector indexes, or PowerPacks, to provide investors with a comprehensive set of trading tools to manage the risk of, or gain exposure to, a diversified group of stocks in certain industry groups. Both cash-settled index options and futures on these 12 new indexes will be offered, trading on CBOE and the CBOE Futures Exchange, respectively.
The 12 individual indexes included in the family of PowerPacks are: CBOE PowerPacks Bank, Biotechnology, Gold, Internet, Iron & Steel, Oil, Oil Services, Pharmaceuticals, Retail, Semiconductor, Technology, and Telecom Indexes.
“We are pleased to introduce this new family of sector indexes, developed to meet the evolving needs of our customers,” said CBOE Chairman and CEO William J. Brodsky. “CBOE has a long tradition of index product innovation, and the launch of these new products highlights our commitment to stay ahead of the curve in this arena. Despite the current challenges to proprietary index options, CBOE remains strongly committed to responding to changing investment needs and opportunities through index product innovation.”
The new CBOE PowerPacks employ a consistent, objective methodology for component selection and calculation. Each index is comprised of 25 securities that are among the largest and most actively traded companies in their respective industry groups. Each index is calculated using a “modified” capitalization methodology that limits the weight of individual components to 10% initially, and on subsequent re-balancing dates. The indexes will be re-balanced quarterly, each on the same date.