Options for Managing Volatility

Options for Managing Volatility -- Income -- Diversification -- Risk-adjusted Returns Please see the last slide for important disclosures By Matthew Moran Vice President, Chicago Board Options Exchange (312) 786-7249; morana cboe.com June 8th, 2010 Presentation for the CFA Society of Ireland

16 Challenging Months Little diversification as stock and commodity indexes fell by more than 50% Month-end values of indexes, re-scaled to 1 as of Oct. 31, 2007 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 Oct-07 D ec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 D ec-08 (Oct. 31, 2007 - Feb. 28, 2009) Sources: CBOE and Bloomberg Total return indexes Feb-09-51% -52% -53% -54% S&P 500 Russell 2000 SP GSCI (commodity) MSCI World Index Net US$ ERISA requires pension fiduciaries to diversify so as to minimize the risk of large losses 2

16 Challenging Months Several worldwide MSCI country stock indexes experienced sharp drops 1.2 Month-end values of indexes, re-scaled to 1 as of Oct. 31, 2007 1.0 0.8 0.6 0.4 0.2 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09-41% -51% -64% -77% MSCI Canada MSCI United States MSCI China Free MSCI Ireland (Oct. 31, 2007 - Feb. 26, 2009) Sources: CBOE and Bloomberg Total return indexes are used for stocks and commodities 3

16 Challenging Months for Alternatives Month-end values of indexes, re-scaled to 1 as of Oct. 31, 2007 1.1 0.9 0.7 0.5 0.3 0.1 Oct-07 D ec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 D ec-08 Feb-09-22% -25% -26% -51% -54% -62% -80% Hedge Fund - CISDM High-Yield Bond (CS) 20-metro Home Price Index Russell 3000 MSCI EAFE MSCI Emerging Mkts Private Equity (Oct. 31, 2007 - Feb. 28, 2009) Sources: CBOE and Bloomberg Total return indexes are used for stocks. S&P Case-Shiller Home Price Index and S&P Private Equity Index are used. 4

Harry Markowitz and Modern Portfolio Theory (MPT) -- [in 2008] the S&P 500 fell approximately 38.5%; the higherbeta emerging-markets asset class fell much farther. Corporate bonds fell in value, but much less than equities, and government bonds went up. Generally, asset classes moved roughly in proportion to their historical betas. MPT never promised high return with low risk. [u]nless our portfolios are comprised entirely of short-term government bonds, we ll be dealing with a level of risk for which MPT prescribes following an old and true adage: Don t put all your eggs in one basket. The Investment Professional magazine (Spring 2009)

16 Challenging Months Can volatility diversify and lessen portfolio volatility? 3.5 Month-end values of indexes, re-scaled to 1 as of Oct. 31, 2007 3.0 2.5 2.0 1.5 1.0 0.5 0.0 194% 150% 25% -51% VIX Short-Term Futures Idx S&P VIX - Spot Volatility Citigroup 30-yr Treasury S&P 500 Feb-09 Dec-08 Oct-08 Aug-08 Jun-08 Apr-08 Feb-08 Dec-07 Oct-07 (Oct. 31, 2007 - Feb. 28, 2009) Sources: CBOE and Bloomberg 6

Diversification over a 23-month Time Period 23 Months Month-end Prices, Re-scaled to 1 on Oct. 31, 2007 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Oct-07 Apr-08 Oct-08 Apr-09 1.38 0.71 0.70 0.57 VIX - CBOE Volatility Index S&P 500 MSCI World Index Net US$ SP GSCI TR (Oct. 31, 2007 - Sep. 30, 2009) Sources: CBOE and Bloomberg 7

29 Months for Select MSCI Country Indexes Month-end values of indexes, re-scaled to 1 as of Oct. 31, 2007 1.2 1.0 0.8 0.6 0.4 0.2-12% -21% -35% -71% MSCI Canada MSCI United States MSCI China Free MSCI Ireland Jan-10 Oct-09 Jul-09 Apr-09 Jan-09 Oct-08 Jul-08 Apr-08 Jan-08 Oct-07 (Oct. 31, 2007 - Mar. 31, 2010) Sources: CBOE and Bloomberg Total return indexes are used for stocks and commodities 8

Higher Correlations for Stock Indexes 1.0 0.5 Rolling One-Year Correlations of Weekly Returns of Indexes to the S&P 500 0.93 0.85 0.83 Russell 2000 MSCI EAFE 0.0-0.5-0.68 MSCI Emerging VXO -1.0 Jan-07 Jan-98 Jan-89 Jan-80 Jan-71 Sources: Bloomberg and CBOE. (Jan. 1, 1971 - April 16, 2010) 9

Higher Correlations for Alternatives Indexes Rolling One-Year Correlations of Weekly Returns of Indexes to the S&P 500 1.0 0.8 0.6 0.4 0.2 0.83 0.76 0.72 S&P Private Equity DJ REIT 0.0-0.2-0.4 S&P GSCI -0.6-0.8-1.0-0.67 VIX Jan-07 Jan-98 Jan-89 Jan-80 Jan-71 Sources: Bloomberg and CBOE. (Jan. 1, 1971 - April 16, 2010) 10

Correlations and Fixed Income Indexes 1.0 0.5 Rolling One-Year Correlations of Weekly Returns of Indexes to the S&P 500 0.71 Citi High- Yield 0.0-0.5-1.0 Jan-71 Jan-80 Jan-89 Jan-98 Jan-07 0.01-0.36-0.67 Citi BIG Index 30-Yr Treasury VIX Sources: Bloomberg and CBOE. (Jan. 1, 1971 - April 16, 2010) 11

Exchange Listed Equity Options Calls Right to buy security at certain price for certain period Puts Right to sell security at certain price for certain period Usually represents 100 shares Limited life usually expires after third Friday Option Info 200 XYZ Jan 50 calls for 1.55 Number of contracts Underlying Security Expiration Date Strike price Call / Put Premium 12

Simple Options Profit-and-Loss Diagrams Long call gives the holder the right to buy the underlying security at a specified price for a certain, fixed period of time. Protective put investor purchases a put (right to sell) while holding underlying security. Buy-write investor buys a security and writes (sells) a covered call for income * The colored line reflects a position with both options and stock 13

Some Key CBOE Options in Jan. 2010 Options Symbol CBOE Options Product Put Avg. Daily Volume Call Avg. Daily Volume Pu/Call Ratio for January Volume Index Options SPX S&P 500 Index 451,605 275,686 1.64 VIX CBOE Volatility Index (options) 65,773 170,977 0.38 RUT Russell 2000 Index 30,430 22,132 1.37 OEX S&P 100 Index (American-Style Exercise) 24,559 17,856 1.38 NDX Nasdaq 100 Index 19,249 14,495 1.33 DJX Dow Jones Industrial Average 8,068 6,601 1.22 Equity Options C Citigroup, Inc. 35,751 118,929 0.30 BAC Bank of America Corporation 46,485 89,928 0.52 AAQ Apple, Inc. 33,265 57,264 0.58 INQ Intel Corporation 20,099 41,139 0.49 JPM JPMorgan Chase & Co. 23,630 32,876 0.72 MQF Microsoft Corporation 12,389 38,824 0.32 GE General Electric Company 18,948 32,234 0.59 F Ford Motor Company 18,458 25,113 0.74 GS The Goldman Sachs Group, Inc. 17,281 24,463 0.71 YUX YRC Worldwide, Inc. 22,167 15,228 1.46 AA ALCOA, Inc. 11,560 19,770 0.58 WFC Wells Fargo & Company 15,692 15,310 1.02 ZQN Amazon.Com, Inc. 11,891 15,398 0.77 GOQ Google, Inc. 10,682 16,340 0.65 RUL Research in Motion Limited 9,779 16,349 0.60 Sources: CBOE and www.cboe.com/data 14

Put/call Ratios 2.5 Put/call Ratios for CBOE Options Rolling 20-day ratios of Put/call Volumes 2.0 1.5 1.0 0.5 Index Options Equity Options VIX options 0.0 29-Nov-2006 29-Nov-2007 29-Nov-2008 29-Nov-2009 (Nov. 29, 2006 - May 17, 2010) Source: www.cboe.com/data 15

Historic Volatility Since 1900 30-day Historic Volatility for U.S. Stock Indexes (DJIA 1900 to 1927, and S&P 500 from 1928 to Sept. 2009) 100 80 96.5 on Nov. 29, 1929 87.5 on Nov. 20, 1987 80.9 on Nov. 14, 2008 End-of-week values 60 40 20 Mean 15.8 Median 13.2 0 Jan-00 Jan-20 Jan-40 Jan-60 Jan-80 Jan-00 Source: Bloomberg 16

30-Day Historic Volatilities for Select MSCI Country Indexes 120 90 60 52.8 MSCI Ireland 30 0 30-Dec-2005 30-Dec-2007 30-Dec-2009 24.1 22.8 MSCI United States MSCI China Free (30-Dec-2005-14-May-2010) Sources: Bloomberg and CBOE 17

Implied Volatility Indexes Since 1986 Indexes Measuring 30-day Implied Volatility (Jan. 2, 1986 - Nov. 2, 2009) Daily Closing Values 160 120 80 40 150.19 VXO on Oct. 19, 1987 100.42 OVX on Dec. 11, 2008 80.86 VIX on Nov. 20, 2008 OVX - CBOE Crude Oil Volatility Index VIX - CBOE Volatility Index VXO - CBOE S&P 100 Volatility Index (pre-1990) 0 21-Feb-2006 30-Jan-2001 18-Jan-1996 10-Jan-1991 2-Jan-1986 Source: Bloomberg Implied Volatility is a measure of the option market s expectations for the future volatility of the underlying security. It is determined by using option prices currently existing in the market at the time (rather than using historical data on the price changes of the underlying stock or index). It is the annualized volatility implied by the market price of the option based on an option pricing model. If a 30-day option and a one-year option both have implied volatilities of 25, that means that the options prices imply that options investors believe that there is about a 68% chance that the price of the underlying will be approximately -- (a) within 25% (or one standard deviation) of its current price one year from now, and (b) within 7.3% (or one standard deviation) of its current price one month from now. (The annualized number of 25% is divided by (the square root of 12)). 18

VIX and S&P 500 Indexes 90 1800 S&P 500 (SPX) VIX Daily Closing Prices 60 30 1200 600 SPX 0 VIX 2-Jan-1990 3-Jan-1995 5-Jan-2000 19-Jan-2005 28-Jan-2010 Sources: CBOE and Bloomberg. (Jan. 2, 1990 - May 14, 2010). www.cboe.com/vix 0 CBOE Volatility Index (VIX) Average daily closing value in each of 20 years 35 30 25 20 15 23.1 18.4 15.4 12.7 13.9 12.4 16.5 22.4 25.6 24.4 23.3 25.8 27.3 22.0 15.5 12.8 12.8 17.5 32.7 31.5 10 5 0 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 Sources: CBOE and Bloomberg 19

Worldwide Volatility Indexes Weekly Highs 100 80 60 40 20 0 16-May-2008 16-Apr-2009 16-Mar-2010 OVX - CBOE Crude Oil Volatility Idx VIX - CBOE Volatility Index GVZ - CBOE Gold Volatility Index EVZ - CBOE EuroCurrency Volat Idx 90 60 VSTOXX - EuroSTOXX 50 Volatility 30 INVIX - India VIX Index 0 16-May-2008 16-Apr-2009 16-Mar-2010 VFTSE - FTSE 100 Volatility Idx (May 16, 2008 - May 14, 2010) Sources: CBOE and Bloomberg 20

Key Features of VIX High Volatility of Volatility Historic Volatility of Daily Returns 132.0% 127.3% VIX (spot) 83.3% 45.8% 94.2% 56.0% 78.5% 88.9% 88.9% 69.2% VIX Nearterm Futures 2005 2006 2007 2008 2009 Negative Correlations of Daily Returns for VIX vs. S&P 500-0.83-0.82-0.85-0.84-0.75 2005 2006 2007 2008 2009 Sources: CBOE and Bloomberg 21

Recent VIX Futures & Call Options 50 VIX and VIX Futures Four Days -- % Change in Daily Closing Prices from May 3 rd to May 7 th S&P 500 Down 7.6% Daily Closing Values 40 30 20 VIX Index VIX May '10 Futures VIX Sept '10 Futures VIX Index Up 103% VIX May Fut. Up 60% VIX Sept. Fut. Up 23% 10 15-Apr-2010 1-May-2010 17-May-2010 Daily Closing Price 9 6 3 0 VIX May 2010 Call Options 15-Apr-2010 1-May-2010 17-May-2010 (April 15, 2010 - May 17, 2010) Sources: CBOE and Bloomberg 25 Strike Price 30 Strike Price 35 Strike Price VIX May25 Calls Up 865% VIX May30 Calls Up 1233% VIX May35 Calls Up 1580% Please read the risk disclosure at the last slide 22

VIX Term Structure on April 14, 2010 (May 2010 Dec. 2011) Expectations of VIX in future months www.cboe.com/vix 24.42 at Dec. 17, 2011 expiration 15.88 mid at May 22, 2010 expiration VIX closed at 15.59 on April 14, 2010 23

Impact of Adding Long VIX Futures or Options to a Traditional Portfolio During the 5-Month Period Aug. 2008 Dec. 2008 From: "VIX Futures and Options: A Case Study of Portfolio Diversification During the 2008 Financial Crisis." The Journal of Alternative Investments (Fall 2009) 0% VIX Futures or Options -19.7% 2.5% VIX Futures -15.9% 10% VIX Futures -4.0% 3% ATM VIX Call Options 20.8% 3% 25%-OTM VIX Call Options 97.2% Please see disclaimers at paper at www.cboe.com/vix 24

UMass Study on Diversification with VIX Futures & Options With a 10% allocation to VIX futures (in black), returns increased by 3.5 percentage points and standard deviation cut by one-third. From: VIX Futures and Options - A Case Study of Portfolio Diversification During the 2008 Financial Crisis (published in The Journal of Alternative Investments in 2009) by Edward Szado, CFA, Research Analyst at the Center for International Securities and Derivatives Markets (CISDM), University of Massachusetts, Amherst 25

CBOE Performance Benchmark Indexes Index Ticker Introduced Data beginning Website CBOE S&P 500 BuyWrite BXM SM 2002 June 30, 1986 www.cboe.com/bxm CBOE S&P 500 BXY SM 2006 2%OTM BuyWrite CBOE Russell 2000 BuyWrite BXR SM 2006 CBOE DJIA BuyWrite BXD SM 2005 CBOE NASDAQ-100 BuyWrite BXN SM 2005 June 1, 1988 Dec. 29, 2000 Oct. 16, 1997 Dec. 30, 1994 www.cboe.com/bxy www.cboe.com/bxr www.cboe.com/bxd www.cboe.com/bxn CBOE S&P 500 95-110 Collar CBOE S&P 500 PutWrite CLL SM 2008 June 30, 1986 www.cboe.com/cll PUT SM 2007 June 30, 1986 www.cboe.com/put Bloomberg provides historical data for all seven indexes. 26

What is a Buy-write? Buy stocks, and write (or sell) a call option to gain premium income. Also known as a covered call. Pros add premium income, can reduce portfolio volatility and boost risk-adjusted returns. Cons forego some or all of the upside on stock position; underperformance in bull market. 27

CBOE S&P 500 BuyWrite Index (BXM) Benchmark for strategy -- buy portfolio of S&P 500 stocks write (sell) cash-settled S&P 500 Index options every 3 rd Friday for income Announced in 2002 study by Duke U. Data history back to June 30, 1986 Innovative Index of the Year in 2004 More than $20 billion in buywrite funds www.cboe.com/bxm 28

CBOE S&P 500 PutWrite Index (PUT) Benchmark for strategy -- write (sell) cash-settled S&P 500 put options every 3 rd Friday for income invest in Treasury Bills as collateral - finance the maximum loss from final settlement of the SPX puts Announced in 2007 Data history back to June 30, 1986 Innovative Index of the Year in 2007 www.putwrite.com 29

Growth of $1 PUT Index end value is 36% higher than that of the S&P 500 Indexes Since Mid-1986 $12 $11.22 PUT Index re-scaled to $1 as of June 30, 1986 $8 $4 $8.38 $8.23 $4.80 $2.74 BXM S&P 500 30-Yr Tr Bd 3-Mo Tr Bill $0 30-Jun-86 30-Jun-97 30-Jun-2008 (June 30, 1986 - Apr. 30, 2010) Sources: CBOE, Bloomberg and Citigroup Fixed Incom e Indexes Please see important risk disclosures on the final slide 30

Rolling 5-year Annualized Returns (June 1991 April 2010) 40% 30% 20% 10% BXM S&P 500 0% -10% Jun-09 Jun-07 Jun-05 Jun-03 Jun-01 Jun-99 Jun-97 Jun-95 Jun-93 Jun-91 Sources: Bloomberg and CBOE 31

Returns and Volatility (June 30, 1986 April 30, 2010) Total Return Indexes Annualized Returns Standard Deviation PUT - CBOE S&P 500 PutWrite Index 10.7% Citigroup 5-yr Treasury 4.7% BXM - CBOE S&P 500 BuyWrite Index 9.3% PUT - CBOE S&P 500 PutWrite Index 10.3% SPTR - S&P 500 Total Return 9.2% CLL - CBOE S&P 500 95-110 Collar Index 11.0% Russell 2000 Total Return Index 8.3% BXM - CBOE S&P 500 BuyWrite Index 11.2% SP GSCI TR 7.7% Citigroup 30-yr Treasury 11.7% MSCI World Index (TR) Net US$ 7.4% MSCI World Index (TR) Net US$ 15.6% CLL - CBOE S&P 500 95-110 Collar Index 7.1% SPTR - S&P 500 Total Return 15.7% Citigroup 30-yr Treasury 6.8% Russell 2000 Total Return Index 20.0% Citigroup 5-yr Treasury 6.5% SP GSCI TR 20.7% Sources: CBOE, Bloomberg and Citigroup Fixed Income Indexes Please see last slide for important risk disclosures. 32

Returns and Volatility (July 1986 April. 2010) PUT CBOE S&P 500 PutWrite Index BXM CBOE S&P 500 BuyWrite Index CLL CBOE S&P 500 95-110 Collar Index Annualized Returns 12% 8% 4% T-bill 3-mo. T-note 5-yr. PUT CLL BXM T-bond 30-yr. S&P 500 MSCI World Russell 2000 0% 0% 5% 10% 15% 20% Standard Deviation of Monthly Returns Sources: CBOE and Bloomberg. The figures above represent total return indexes; Citigroup indexes are used for the fixed income numbers. Please see risk disclosures. Past performance is not a guarantee of future returns. 33

Source of Returns- Sell Rich Options From: "Finding Alpha via Covered Index Writing," Financial Analysts Journal. (September/October 2006). 34

Gross Monthly Income from Options Premiums 9% BXM Index - Monthly Premiums Gross amount* received as a % of the underlying Average was about 1.8% per month 6% 3% 0% Jun-88 Jun-93 Jun-98 Jun-03 Jun-08 (June 1988 - May 2010). Source: CBOE. * Please note that these are gross amounts, and the net return often will be substantailly less with a buywrite strategy. www.cboe.com/benchmarks 35

Histograms of Monthly Index Returns for 284 Months (July 1986 - Feb. 2010) Sources: CBOE and Bloomberg 100 S&P 500 TR Index 66 150 BXM Index 119 50 0 41 28 0 0 1 0 1 1 0 2 8 8 13 51 37 17 8 1 1 0 0 0 0 0 100 50 0 47 0 0 0 0 1 1 0 3 1 4 1013 54 25 4 2 0 0 0 0 0 0 0 24% 20% 16% 12% 8% 4% 0% -4% -8% -12% -16% -20% -24% 24% 20% 16% 12% 8% 4% 0% -4% -8% -12% -16% -20% -24% Low month -21.5% High month 13.5% Low month -17.4% High month 8.2% 100 CLL Index PUT Index 70 150 135 50 0 55 41 15 0 0 0 0 0 0 0 0 1 5 0% -4% -8% -12% -16% -20% -24% 59 27 9 8% 4% 1 1 0 0 0 0 0 0 24% 20% 16% 12% 100 50 0 41 0 0 0 0 1 1 1 1 2 3 7 9 0% -4% -8% -12% -16% -20% -24% 64 15 3 1 0 0 0 0 0 0 0 24% 20% 16% 12% 8% 4% Low month -8.6% High month 10.8% Low month -17.7% High month 8.4% Number of months in which the index returns are within 2 percentage points under the number on the x-axis 36

Studies on BuyWrites Fund Evaluation Group. Study of BXD and VXD Indexes (2007) at www.cboe.com/bxd http://www.feg.com/documents/evaluationofbuywriteandvolatilityindexes.pdf Callan Associates. An Historical Evaluation of the CBOE S&P 500 BuyWrite Index (BXM). (Oct. 2006). at www.cboe.com/bxm http://www.cboe.com/micro/bxm/callan_cboe.pdf Goldman Sachs. "Finding Alpha via Covered Index Writing," Financial Analysts Journal. (September/October 2006). www.888options.com/institutional/research/pdfs/finding_alpha_via_covered_index_writing.pdf Ibbotson Associates. Feldman, Barry, and Dhruv Roy, "Passive Options-Based Investment Strategies: The Case of the CBOE S&P 500 BuyWrite Index." The Journal of Investing. (Summer 2005). at www.cboe.com/bxm www.cboe.com/micro/bxm/ibbotsonaug30final.pdf Duke University. Whaley, Robert. "Risk and Return of the CBOE BuyWrite Monthly Index" The Journal of Derivatives (Winter 2002). University of Massachusetts. Schneeweis, Thomas, and Richard Spurgin. "The Benefits of Index Option-Based Strategies for Institutional Portfolios" The Journal of Alternative Investments, (Spring 2001). www.cboe.com/benchmarks 37

Study By Ibbotson Associates A case study of a real-life BXM investment program is included. The study (both long and short versions) is available at www.cboe.com/bxm 38

Study by Fund Evaluation Group 39

Risk-adjusted Returns Exhibit 6 from the Callan Study 40

Exhibit 17 from Callan Associates 2006 Study 10.25% Annualized Return versus Risk (June 1, 1988 - August 31, 2006) 10.00% Aggressive + BXM 9.75% Moderate + BXM Aggressive 9.50% Moderate Returns 9.25% 9.00% 8.75% Conservative + BXM Conservative 8.50% 8.25% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% Standard Deviation Measuring the impact of adding CBOE BXM to diversified portfolios. Calculated with monthly rebalancing over the period June 1, 1988 to August 31, 2006. BXM substituted for 10% of large cap equity exposure in each asset mix. In all cases, return is essentially unchanged while risk is reduced, improving the risk-adjusted return as measured by the Sharpe ratio. 41

Pensions & Investments Sept. 7, 2009 excerpts 42

Returns and Volatility for Select Indexes A-T-M BuyWrite BXM - CBOE S&P 500 BuyWrite Index A-T-M BuyWrite BXY - CBOE S&P 500 2% OTM BuyWrite Put Write PUT - CBOE S&P 500 PutWrite Index Collar CLL - CBOE S&P 500 95-110 Collar Index US Large Cap SPTR - S&P 500 Total Return World Stocks MSCI World Index (TR) Net US$ U.S. Treasuries Citigroup 30-yr Treasury Commodities SP GSCI TR BXM BXY PUT CLL SPTR World 30-Yr Tr GSCI TR One-Year Annualized Return 25.6% 35.0% 29.5% 24.8% 38.8% 37.0% -3.8% 30.6% Three-Year Annualized Return -1.7% -0.9% 2.3% -3.0% -5.0% -6.8% 5.6% -7.9% Five-Year Annualized Return 2.8% 4.3% 6.0% 2.4% 2.6% 3.3% 3.9% -4.6% Ten-Year Annualized Return 2.4% 2.5% 4.7% 1.3% -0.2% 0.4% 6.5% 4.1% Twenty-Year Annualized Return 9.2% 9.9% 10.5% 6.8% 8.9% 6.5% 7.7% 4.6% Annualized Return Since 30-Jun-1986 9.3% 10.7% 7.1% 9.2% 7.4% 6.8% 7.7% One-Year Standard Deviation 9.5% 10.0% 8.3% 9.4% 11.7% 13.9% 11.0% 22.5% Three-Year Standard Deviation 16.2% 18.1% 16.1% 12.2% 20.2% 21.9% 18.6% 31.4% Five-Year Standard Deviation 12.8% 14.4% 12.7% 10.3% 16.3% 17.7% 15.6% 27.8% Ten-Year Standard Deviation 12.2% 13.9% 12.0% 10.7% 15.9% 16.4% 13.8% 25.4% Twenty-Year Standard Deviation 10.7% 12.4% 10.0% 10.6% 15.0% 15.3% 11.8% 21.9% Standard Deviation Since 30-Jun-1986 11.2% 10.3% 11.0% 15.7% 15.6% 11.7% 20.7% Total Returns Indexes, for Periods Ending April 30, 2010. Sources: CBOE and Bloomberg 43

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options (the ODD ). The ODD and supporting documentation for any claims, comparisons, recommendations, statistics or other technical data in these materials are available by calling 1-888-OPTIONS, or contacting CBOE at www.cboe.com/contact. The information in these materials is provided solely for general education and information purposes and therefore should not be considered complete, precise, or current. Many of the matters discussed are subject to detailed rules, regulations, and statutory provisions which should be referred to for additional detail and are subject to changes that may not be reflected in these materials. No statement within this material should be construed as a recommendation to buy or sell a security or to provide investment advice. The CBOE S&P 500 BuyWrite Index (BXM SM ), CBOE S&P 500 2% OTM BuyWrite Index (BXY SM ), CBOE DJIA BuyWrite Index (BXD SM ), CBOE Russell 2000 BuyWrite Index (BXR SM ) and CBOE NASDAQ-100 BuyWrite Index (BXN SM ) (the Indexes ) are designed to represent proposed hypothetical buy-write strategies. Like many passive benchmarks, the Indexes do not take into account significant factors such as transaction costs and taxes. Transaction costs and taxes for a buy-write strategy could be significantly higher than transaction costs for a passive strategy of buying-and-holding stocks. Investors attempting to replicate the Indexes should discuss with their brokers possible timing and liquidity issues. Past performance does not guarantee future results. These materials contain comparisons, assertions, and conclusions regarding the performance of indexes based on backtesting, i.e., calculations of how the indexes might have performed in the past if they had existed. Backtested performance information is purely hypothetical and is provided in this document solely for informational purposes. The methodology of the Indexes is owned by Chicago Board Options Exchange, Incorporated (CBOE) may be covered by one or more patents or pending patent applications. Standard & Poor's, S&P, and S&P 500 are registered trademarks of The McGraw-Hill Companies, Inc. and are licensed for use by CBOE. "Dow Jones", "The Dow", "DJIA" and Dow Jones Industrial Average are trademarks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by CBOE. CBOE's options based on Dow Jones indexes and financial products based on the CBOE DJIA BuyWrite Index are not sponsored, endorsed, marketed or promoted by Dow Jones and Dow Jones makes no representations regarding the advisability of investing in such products. Nasdaq, Nasdaq-100, and Nasdaq-100 Index, are trademarks of The Nasdaq Stock Market, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by CBOE. The CBOE NASDAQ-100 BuyWrite Index (the "BXN Index") is not derived, maintained, published, calculated or disseminated by the Corporations. CBOE Volatility Index, VIX, CBOE and Chicago Board Options Exchange are registered trademarks and BXM, BXD, BXN and BXY are servicemarks of CBOE. Copyright 2010 Chicago Board Options Exchange, Incorporated. All Rights Reserved. 44