Harnessing Social Media Sentiment and the Volatility Risk Premium in the Quest for AlphaMarch 28, 2017 at 5:45 p.m. at Bourbon Street Bar and Grill, 346 W 46th Street, NYC 10036 for NY QWAFAFEW

JanBy Matt Moran , VP, CBOE 1 -312-786-7249 moran @ cboe.com

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Bond Markets Since 1285Paul Schmelzing of Harvard University wrote in January 2017:

“ … at 36 years, the current bond bull market had been stretched. As chart 2 shows, over 800 years only two previous episodes – the rally at the height of Venetian commercial dominance in the 15th century, and the century following the Peace of Cateau-Cambrésis in 1559 – recorded longer continued risk-free rate compressions. …It thus appears timely to ask about the characteristics of bear bond markets. ,,, on our count the United States (the current issuer of the global risk-free asset) experienced 12 modern “bond shock” years, during which selloff dynamics cost long-term sovereign bond creditors more than 15% in real price terms … “

Wall Street Journal March 22, 2012What Does the Prudent Investor Do Now? In The Wall Street Journal, Princeton University economist Burton Malkiel writes that at a yield of 2.25%, the 10-year U.S. Treasury is a sure loser and stocks are a safer choice.By Burton G. Malkiel … Bonds are the worst asset class for investors. Usually thought of as the safest of investments, they are anything but safe today. At a yield of 2.25%, the 10-year U.S. Treasury note is a sure loser. Even if the overall inflation rate is only 2.25% over the next decade, an investor who holds a 10-year Treasury until maturity will realize a zero real (after-inflation) return. If the investor sells prior to maturity, it will likely be for less than the face value of the note if the inflation rate rises. 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. …

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Tail Risk and DrawdownsTwo periods during which many stock and commodity indexes experienced sharp drawdowns --

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Historic Volatility Since 1920

Historic Volatility is a measure of actual price changes during a specific time period in the past. Typically, historic volatility is measured as the annualized standard deviation of daily returns during a specific past period.

In early 2017 (through March 10) the average historic volatility was only 6.6

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Implied Volatility and Skew (based on forward-looking options prices)

Implied Volatility is a forward-looking annualized volatility figure derived from the current market price of options. VIX Index is a measure of 30-calendar-day implied or expected volatility. SKEW Index values are calculated from weighted strips of out-of-the-money S&P 500 options, and often rise to higher levels as investors become more fearful of a “black swan” event.

Average daily close for VIX Index was > 19.7 in 1990 – 2016, and 11.7 in 2017 (through March 27)

Average daily close for SKEW Index was > 118.5 in 1990 – 2016, and 135.6 in 2017 (through March 27)

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SPX Volatility Skew on 3 Select Dates

The CBOE SKEW Index is impacted by the slope of the volatility skew curve for the SPX options

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Odds on Sunday, Nov. 6, 2016

PredictIt, an online trading platform jointly run by Victoria University in New Zealand, and Washington, D.C.-based political consulting firm Aristotle International Inc:

• Clinton - 81 percent• Trump - 20 percent

Iowa Electronic Markets, winner-takes-all trading market:

• Clinton - 71 percent• Trump - 28 percent

UK-based Betfair, internet betting exchange:

• Clinton - 83 percent• Trump - 18 percent

UK-based Ladbrokes, online betting platform:

• Clinton - 83 percent• Trump - 22 percent

Ireland's Paddy Power, bookmaker:

• Clinton - 83 percent• Trump - 18 percent

Source: “Betting sites see record wagering” at cnbc.com on Nov. 7, 2016

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Key Financial Markets (April 15 – Dec. 13, 2016)

June 24 - Brexit

Sep. 28 – 1st

Debate

Oct. 28 & Nov. 6 Comey

Nov. 8 – U.S.

ElectionKey EventsBPVIX Index rose 210% (from 9.4 on May 2, to 29.1 on June 14).

VIX® Index rose a record 9 days in a row (Oct. 25 – Nov. 4).

Record high volume days for VIX futures in non-U.S. hours on June 24 and Nov. 9.

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Financial Markets on Nov. 8 & 9 (morning)

VIX Nov. futures rose 55% in ~ 2 hours on election night

VVIX Index fell from high of 114.56 on Nov. 8 to a low of 99.51 mid-day on Nov. 9

Mexican peso fell 12.6% in ~ 2 hours on election night

TYVIX Index rose from low of 5.11 on Nov. 8 to 5.64 midday Nov. 9

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CBOE and Social Media Initiatives

Twitter – 727,000 followers at www.twitter.com/CBOE

Blogs – www.cboe.com/Blogs

CBOE Press ReleaseCBOE to Develop Series of Social Media-Based Strategy Benchmark IndexesEnters into Exclusive Licensing Agreement with Social Market AnalyticsIndexes to Be Based on Data That Tracks Stock-Related Sentiment on Social MediaCHICAGO, IL – June 14, 2016 – Chicago Board Options Exchange® (CBOE®) announced today that it has entered into an exclusive licensing agreement with Social Market Analytics (SMA) to develop a series of sentiment-based strategy benchmark indexes based on SMA’s social media metrics.SMA, headquartered in Chicago, is a leader in providing actionable intelligence from social media sources. SMA data analyzes social media streams to estimate market sentiment. SMA’s patented process extracts relevant Tweets, validates their sources and evaluates their meanings. Metrics are converted into actionable indicators called S-Factors™, designed to capture the signature of financial market sentiment and provide a leading indicator of market movement.CBOE is exclusively licensing SMA’s proprietary data to create strategy benchmark indexes and plans to introduce the first index this summer. * * * About Social Market Analytics:Social Market Analytics is a Chicago-based firm that provides institutional investors (banks, hedge funds, brokerages) with streaming up-to-the-minute social media quantification and analysis that can help them outperform the market (see: www.socialmarketanalytics.com). Its patented technology has consistently proved that the Tweets of professional traders can help both institutional and individual traders outperform the market. * * *

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Analysis of Millions of Tweets

SMA Proprietary & Confidential12

SMA Patented Social Media Framework

SMA’s Patented Technology Generates Predictive Indicators Of Market Behavior Based On Social Media Sentiment And Provides Its Customers With Actionable Intelligence To

Discover Real-Time Investing Opportunities

Raw Materials Actionable Intelligence

Soci

al M

edia

Dat

a Extractor Evaluator Calculator

Extracts All Tweets For Designated Securities

No Filtering

Removes Spam And Assesses Relevance Of Data

Calculation Engine Quantifies Relevance Based On Indicative Data

>90% of TweetsFiltered Out

SMA S-Factors:

Powerful Trading Tool For The Institutional Investing Community

Quantified Real-time Sentiment Data For Securities

Continuous Feedback

S-ScoreS-MeanS-DeltaS-Volatility

S-VolumeSV-ScoreS-DispersionS-VelocityS-Acceleration

Extractor• Source Agnostic Retrieval Platform

• All U.S. Equities, Commodities, Forex , ETFs, Sectors, Industries And Major Indices

• Message, Source, Posting Account, Location Data

Evaluator• Capital Markets Tuned Lexicon

• Identification Of Professional Investors

• Identification Of Relevant Tweets

Patented Technology

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CBOE-SMA Large-Cap Index (SMLC)

Yearly Returns2015 2016 2017 YTD Thru Mar 27)

SMLC Index -0.3% 38.6% 5.4%SPX Index -0.7% 9.5% 4.6%

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Four Select Dates – Difference > 3%

24-Aug-2015 25-Aug-2015 15-Jan-2016 24-Jun-2016SMLC 2.1% SMLC -4.8% SMLC 1.2% SMLC -0.6%SPX -3.9% SPX -1.4% SPX -2.2% SPX -3.6%

SMLC - SPX 6.0% SMLC - SPX -3.4% SMLC - SPX 3.4% SMLC - SPX 3.0%

ANTM 1.3% AAPL -6.6% ABBV 8.2% AMZN 0.9%BA 2.9% ABBV -6.8% AEP 0.6% APH -0.4%BHI -3.4% AVGO -4.9% AVGO -0.2% BA -1.3%

BMRN 4.1% BAC -5.8% C -0.1% CERN 0.7%CAJ 1.5% BCS -4.0% CBS 0.7% DHR 0.6%

CERN 3.2% BMRN -2.9% CVX 2.5% EBAY -2.7%CI 6.6% BUD -3.2% DUK 0.8% ECL -1.3%

CMG 1.3% CELG -5.0% EA 2.7% GPC 0.7%COST 0.8% CMCSA -3.6% FMX 0.4% HPQ -1.2%DVA -2.5% DVA -1.2% GILD 1.6% INTU 1.4%ETN 4.9% GILD -2.7% INFY -0.1% KMB -0.4%

F 7.8% INTC -4.3% INTC 0.1% KR 3.4%FCX 0.1% IP -5.9% INTU 0.1% MFG 0.7%HAL 1.7% JPM -5.1% MDT 1.2% MPC 1.3%IBKR -0.1% MCO -3.2% NOK -0.3% PPG -5.0%JCI 3.1% MMM -3.0% PEG 1.0% PPL -1.7%JNJ 1.9% MON -7.6% PSX 2.0% PX -1.6%LMT 3.9% MU -6.0% PUK -0.3% REGN -0.6%MJN 3.8% SHW -5.3% TSM 2.6% SCHW -4.4%MTU 2.4% SPG -7.6% USB 2.7% SMFG 0.3%NKE 3.6% STI -4.8% VZ 0.9% SPGI -2.0%OMC 1.8% SWKS -5.6% WEC 1.0% SU -0.2%PSX -0.4% USB -5.4% WY -0.4% UN -1.2%

ROST 3.5% VOD -4.7% XEL 0.7% UPS -0.2%SO -1.0% VRTX -4.4% XOM 1.6% YUM -1.2%

Avg. for 25 stocks 2.1% Avg. for 25 stocks -4.8% Avg. for 25 stocks 1.2% Avg. for 25 stocks -0.6%

The 25 stocks with high SMA S-Scores on 4 select dates

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CBOE Strategy Benchmark Indexes

www.cboe.com/benchmarks

BuyWrite Indexes1 BXM CBOE S&P 500 BuyWrite Index

2 BXD CBOE DJIA BuyWrite Index

3 BXMC CBOE S&P 500 Conditional BuyWrite Index

4 BXMD CBOE S&P 500 30-Delta BuyWrite Index

5 BXMW CBOE S&P 500 Multi-Week BuyWrite Index

6 BXN CBOE Nasdaq BuyWrite Index

7 BXR CBOE Russell 2000 BuyWrite Index

8 BXRC CBOE Russell 2000 Conditional BuyWrite Index

9 BXRD CBOE Russell 2000 30-Delta BuyWrite Index

10 BXY CBOE S&P 500 2% OTM BuyWrite Index

PutWrite Indexes11 PUT CBOE S&P 500 PutWrite Index

12 PUTR CBOE Russell 2000 PutWrite Index

13 WPUT CBOE S&P 500 One-Week PutWrite Index

14 WPTR CBOE Russell 2000 One-Week PutWrite Index

Combo, Butterfly & Condor Indexes15 CMBO CBOE S&P 500 Covered Combo Index

16 BFLY CBOE S&P 500 Iron Butterfly Index

17 CNDR CBOE S&P 500 Iron Condor Index

Collar Indexes18 CLL CBOE S&P 500 95-110 Collar Index

19 CLLR CBOE Russell 2000 Zero-Cost Put Spread Collar Index

20 CLLZ CBOE S&P 500 Zero-Cost Put Spread Collar

Risk Reversal Index21 RXM CBOE Risk Reversal Index

SMILE Index22 SMILE CBOE SMILE Index

Put Protection Index23 PPUT CBOE S&P 500 5% Put Protection Index

Volatility-related Benchmark Indexes24 VPD CBOE VIX Premium Strategy Index23 VPN CBOE Capped VIX Premium Strategy Index24 VXTH CBOE VIX Tail Hedge Index25 LOVOL CBOE Low Volatility Index26 VSTG CBOE VIX Strangle Index

Target Outcome IndexesSPRO CBOE S&P 500 Buffer Protect Index Balanced SeriesSPEN CBOE S&P 500 Enhanced Growth Index Balanced Series

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Four Options-based Benchmarks -- Descriptions

Index StrategyYear

IntroducedEarliest Historical

Price

CBOE S&P 500 Buy Write Index (BXM)

Purchase stocks in the S&P 500 index, and each month sell at-the-money index call options

2002 June 30, 1986

CBOE S&P 500 2% OTM Buy Write Index (BXY)

Purchase stocks in the S&P 500 index, and each month sell index call options 2% out-of-the-money

2006 June 1, 1988

CBOE S&P 500 PutWrite Index (PUT)

Purchase Treasury bills and sell cash-secured put options on the S&P 500 index

2007 June 30, 1986

CBOE S&P 500 95-110 Collar Index (CLL)

Purchase stocks in the S&P 500 index, and each month sell index call options at 110% of the index value, and each quarter purchase index put options at 95% of the index value

2008 June 30, 1986

Excerpted from --"Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs” (January 2015) Please see the last slide for important disclosures.

15 new benchmark indexes are being introduced in 2015 www.cboe.com/benchmarks

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PutWrite Indexes in 2016• Four CBOE benchmarks – PUT, PUTR, WPUT, & WPTR

• Pension funds – Hawaii and South Carolina

• WSJ on Aug. 21, 2016 – “Pensions Play With Puts for Protection - Options strategy used by pension funds aims to work like a volatility dampener …. annualized returns [for PUT] over the 30 years through this June were 10%, narrowly topping the S&P 500. Risk mitigation was behind a decision by the Hawaii Employees’ Retirement System to invest $1.6 billion of its $15 billion portfolio in a put-writing strategy …”

• Pensions & Investments on Oct. 3, 2016 - Funds go exotic with put-write options to stem volatility. Put-write equity options are finding their way into more pension fund allocations to protect against volatility and, in some cases, take the place of fixed income as an income provider.

• ETF designed to track CBOE PUT Index

• Five papers in 2016 – strong risk-adjusted returns for CBOE putwrite indexes (by Bondarenko, Shore, Black & Szado, Wilshire, and Fund Evaluation Group (FEG))

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Eight Studies - Benchmark Indexes That Write Index Puts

• Asset Consulting Group. An Analysis of Index Option Writing for Liquid Enhanced Risk-Adjusted Returns (2012)

• Black, Keith, and Edward Szado. Performance Analysis of CBOE S&P 500 Options-Selling Indices. (2016)

• BlackRock. VIX Your Portfolio - Selling Volatility to Improve Performance (2013)

• Bondarenko, Oleg. An Analysis of Index Option Writing with Monthly and Weekly Rollover. (2016)

• Fund Evaluation Group (FEG). Evaluating Options For Enhanced Risk-Adjusted Returns: CBOE Russell 2000 Option Benchmark Suite and Case Studies on Fund Use of Options (2016)

• Ennis Knupp & Associates. Evaluating the Performance Characteristics of the CBOE S&P 500 PutWrite Index (Dec. 2008)

• Shore, Mark. Analyzing Russell 2000 Options-Based Benchmark Indexes Designed to Provide Enhanced Yields and Risk-Adjusted Returns. (2016)

•• Wilshire. Three Decades of Options-Based Benchmark Indices with Premium Selling or

Buying: A Performance Analysis (2016).

www.cboe.com/benchmarks

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Benchmark Indexes Over 30½ Years

Returns in Recent Years2008 2009 2010 2011 2012 2013 2014 2015 2016

-26.8% 31.5% 9.0% 6.2% 8.1% 12.3% 6.4% 6.4% 7.8% PUT - CBOE S&P 500 PutWrite Index-37.0% 26.5% 15.1% 2.5% 15.5% 32.4% 13.7% 1.4% 12.0% S&P 500-28.7% 25.9% 5.9% 5.7% 5.2% 13.3% 5.6% 5.2% 7.1% BXM - CBOE S&P 500 BuyWrite Index

Total return (pre-tax) indexes. Sources: CBOE and Bloomberg. Past performance is not predictive of future returns. www.cboe.com/benchmarks

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Returns and Volatility Since Mid-1986 13 benchmark indexes

PUT Index is in the top 3 on both charts 8 options indexes had lower volatility

Past results are not predictive of future performance. See the last slide for important disclosures.

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Asset Class Relative Performance

This “heat map” uses color to rank returns across asset class by year (within each column). Over the past 15 years, option-writing strategies, particularly the BXMD and PUT strategies, typically had above-average returns and were rarely among the lower-performing asset classes. Other asset classes were occasionally top performers but also were ranked at or near the bottom more than once. Past performance is not predictive of future returns. Sources: Bloomberg, CBOE, St. Louis Federal Reserve Bank and Wilshire Associates. Please read important disclosures at www.cboe.com/benchmarks. Excerpted from Paper by Wilshire: Three Decades of Options-Based Benchmark Indices with Premium Selling or Buying: A Performance Analysis (2016) (at www.cboe.com/benchmarks)

Exhibit 3

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CBOE S&P 500 BuyWrite (BXM) -10.9% -7.6% 19.4% 8.3% 4.2% 13.3% 6.6% -28.7% 25.9% 5.9% 5.7% 5.2% 13.3% 5.6% 5.2%

CBOE S&P 500 30-Delta BuyWrite

(BXMD)-8.9% -13.2% 25.9% 10.4% 5.0% 17.8% 6.2% -31.3% 32.1% 11.2% 7.3% 11.0% 19.1% 6.2% 4.0%

CBOE S&P 500 PutWrite (PUT) -10.6% -8.6% 21.8% 9.5% 6.7% 15.2% 9.5% -26.8% 31.5% 9.0% 6.2% 8.1% 12.3% 6.4% 6.4%

CBOE S&P 500 Zero-Cost Put Spread Collar

(CLLZ)-10.1% -16.0% 18.0% 6.2% 3.0% 13.9% 4.4% -31.7% 24.7% 6.7% 3.1% 11.1% 16.4% 4.2% 2.0%

CBOE S&P 500 5% Put Protection (PPUT) -2.1% -17.6% 19.3% 6.0% 2.3% 12.3% -0.5% -20.1% 8.7% 11.7% -1.4% 10.0% 27.1% 11.2% -5.1%

S&P 500 -11.9% -22.1% 28.7% 10.9% 4.9% 15.8% 5.5% -37.0% 26.5% 15.1% 2.1% 16.0% 32.4% 13.7% 1.4%

MSCI EAFE (US$ Net) -21.4% -15.9% 38.6% 20.2% 13.5% 26.3% 11.2% -43.4% 31.8% 7.8% -12.1% 17.3% 22.8% -4.9% -0.8%

BAML Invest. Grade Corporate Bonds 8.4% 10.0% 9.1% 5.1% 4.6% 0.9% 5.8% -7.6% 21.8% 7.6% 9.6% 7.2% 1.0% 8.5% -2.9%

S&P GSCI -31.9% 32.1% 20.7% 17.3% 25.6% -15.1% 32.7% -46.5% 13.5% 9.0% -1.2% 0.1% -1.2% -33.1% -32.9%

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Efficient Frontier

BXMD - CBOE S&P 500 30-Delta BuyWrite Index CLLZ - CBOE S&P 500 Zero-Cost Put Spread Collar BXM - CBOE S&P 500 BuyWrite Index PPUT - CBOE S&P 500 5% Put Protection Index PUT - CBOE S&P 500 PutWrite Index

In a three-decade analysis of the indexes above, the BXMD and PUT indexes had the strongest risk-adjusted returns of the equity-related investments in this study. Past performance is not predictive of future returns. Sources: Bloomberg, CBOE, St. Louis Federal Reserve Bank and WilshireAssociates. Please read important disclosures at www.cboe.com/benchmarks.

Exhibit 6

Excerpted from Paper by Wilshire: Three Decades of Options-Based Benchmark Indices with Premium Selling or Buying: A Performance Analysis (2016) (at www.cboe.com/benchmarks)

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Excerpted from paper by Fund Evaluation Group. Evaluating Options for Enhanced Risk-Adjusted Returns: CBOE Russell 2000 Option Benchmark Suite and Case Studies on Fund Use of Options (2016)

Richly Priced Index OptionsExcerpted from paper by Wilshire -Three Decades of Options-Based Benchmark Indices with Premium Selling or Buying: A Performance Analysis (2016)

Both papers are available at www.cboe.com/benchmarks). See the last slide for important disclosures.

S&P 500 (SPX) options

Russell 2000 (RUT) options

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Drawdowns

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Oleg B - Risk-adjusted Returns Since Mid-1986

Past performance is not predictive of future returns. Please read the last slide for disclosures.

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BlackRock – Short Volatility Strategies

From paper by BlackRock. VIX Your Portfolio - Selling Volatility to Improve Performance (2013). Please see last slide for important disclaimers. www.cboe.com/benchmarks

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EnnisKnupp - PUT Index Gross Premiums and VIX Index

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Oleg B - Aggregate Gross Premiums

Past performance is not predictive of future returns. Please read the last slide for disclosures.

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Russell -- Sharpe Ratios at Different Strikes and MaturitiesFrom paper by Russell Investments. Capturing the Volatility Premium through Call Overwriting. (July 2012) http://bit.ly/Russell-Buy-Write

Past performance is not predictive of future returns. Please see the last slide for important disclosures. www.cboe.com/benchmarks

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Warren Buffett – Selling Long-Dated O-T-C Index Put Options(How is the PUT Index strategy similar or different?)

http://news.morningstar.com/articlenet/article.aspx?id=285699

Warren Buffett's Comments on Option Investing The Oracle of Omaha has been writing puts.| 04-03-2009 |

“In his 2008 letter, Buffett discusses his derivatives positions and the mark-to-market losses on those positions last year. … Buffett says in his letter, "Our put contracts total $37.1 billion (at current exchange rates) and are spread among four major indexes: the S&P 500 in the U.S., the FTSE 100 in the U.K., the Euro Stoxx 50 in Europe, and the Nikkei 225 in Japan. Our first contract comes due on Sept. 9, 2019, and our last on Jan., 24, 2028. We have received premiums of $4.9 billion, money we have invested." As such, his strategy is twofold. First, he sells overvalued options by writing puts with very long horizons of more than 15 years, which are systematically overpriced. Second, he is making a classic Warren Buffett move, using the "float," or premium, from the options to invest. Because the options he has written are "European," which means they can only be exercised at expiration, he won't need to worry about having to pay out the notional value before expiration. All in all, this is just the type of elegant option-investing strategy to expect from a brilliant investor with a giant pool of capital. Buffett's strategy has collected a $4.9 billion option premium so far on his $37.1 billion notional index options, but the Black-Scholes model currently estimates a $10 billion liability, so currently he has a $5.1 billion loss on a generally accepted accounting principles basis. However, on a fundamental basis, as he says, "It's only the price on the final day that counts." …. “

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North American Pension Funds and Use of Options

In July 2013 CalSTRS (California State Teachers Retirement System, with $140 billion in AUM) issued a request to investment managers for -- "Risk-Managed Equity - Low Volatility Equity and Covered Call Strategies. … CalSTRS will consider both active and passive covered call strategies benchmarked to the CBOE S&P 500 BuyWrite Index (BXM).”

“CalSTRS Putting in Place Low Vol Covered Call Program”, EQ Deriv., March 25, 2015.

In addition, The Santa Barbara County Employees Retirement System, the Hawaii Employees Retirement System, the Los Angeles Department of Water and Power Employees Retirement Plan, the Seattle City Employee Retirement System and the Alaska Retirement Management Board are all in various stages of adopting buy-write strategies benchmarked against the Chicago Board Options Exchange's BXM index. In 2016 Hawaii Employees Retirement System made another allocation to option writing.

Large public pension funds in Texas, Wisconsin and Canada also are reported to use options-based strategies.

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New Universes for Options-based FundsMORNINGSTAR In April 2016 Morningstar placed dozens of mutual funds in its new Option Writing category in its U.S Retail Category system. Morningstar’s Category Index for the new Option Writing category is the CBOE S&P 500 BuyWrite Index (BXM). Steve Sears in Barron’s Striking Price column on May 7, 2016 –

“ … THE OPTIONS INDUSTRY has taken a major step onto Main Street. Morningstar, which millions of individuals rely upon to evaluate mutual funds, has created a category for options-trading funds. The significance of this can’t be overstated. It indicates options have become part of the mainstream investment landscape, like growth mutual funds and index funds. … Morningstar’s recognition will probably incentivize asset managers to market new funds in the category. … “

INFORMA / ZEPHYR In July 2016 Informa Investment Solutions announced a new covered options universe available in their PSN database. The covered options writing universe was designed to help advisors and institutional investors identify and evaluate the performance of separately managed accounts and managers using options-based strategies. The Zephyr StyleADVISOR also has decades of monthly historical data on the CBOE S&P 500 BuyWrite Index (BXM).

EVESTMENT Over 40 options-based CBOE Strategy Benchmark Indexes were added to the eVestment database in 2016, providing the ability to track performance of asset managers and index benchmarks.

STUDY WITH LIST OF 119 OPTIONS-BASED FUNDS. The 2015 study by Black & Szado provides lists with 119 funds (mutual funds, closed-end funds, and ETFs) that invest in options, and provides analyses of performance of the funds, the BXM, S&P 500, and other indexes.

www.cboe.com/funds

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‘40 Act Funds and Use of Options or Volatility

Goldman Sachs - Mutual Fund Use of Options (2012 and 2014)

Univ. of Augsburg - The Benefits of Option Use by Mutual Funds (2015)

Keith Black and Edward Szado. Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs (2015) (with list of names and tickers for 119 funds) www.cboe.com/funds

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Goldman Sachs - Papers on Mutual Fund Use of Options (2012 and 2014) – Below are highlights from 2014 paper by John Marshall

FUND FAMILIES. Five of the top 15 fund families now have funds that use options.

FUNDS. At least 196 funds use options, and these 196 funds had more than $480 billion in assets under management at the end of 2013.

STRATEGIES. The % of positions held by mutual funds in each options strategy – 64% in short calls, 22% in short puts, 8% in long puts, and 6% in long calls.

MATURITIES. About 47% of short-options positions had a maturity of 30 days or less, while about 40% of long-options positions had a maturity of 30 days or less.

TYPES OF OPTIONS. Over the past two years, fund usage of both single-stock options and index options has grown, while fund usage of ETF options has decreased.

GROWTH IN ASSETS. Over the past 5 years, assets under management for the option-using funds have grown 160%, versus 110% growth for their peer funds that do not use options.

STRONGER PERFORMANCE. Over the 5-year period ending March 4, 2014, the funds that used options had higher returns, lower volatility, and higher risk-adjusted returns than their peer funds that do not use options.

Past performance is not predictive of future returns. Please see the last slide for important disclosures.

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Univ. of Augsburg – Paper on The Benefits of Option Use by Mutual Funds (2015)

Use of options by mutual funds yields higher risk-adjusted performance compared with nonuser funds. Option user funds show significantly lower systematic risk because they use options mainly for hedging strategies and not for speculation. We base our analysis on a large, comprehensive and previously unused sample of the SEC’s mandatory N-SAR filings. Consistent with covered call strategies for income generation, we show that mutual funds’ short positions are the main drivers of the performance-enhancing effect. On the other hand, consistent with protective put strategies for hedging, long option positions are the predominant contributors to the risk-reducing effect of options.Authors - Markus Natter, Martin Rohleder, Dominik Schulte, and Marco Wilkens

http://bit.ly/Augs-MutFd-Opt Past performance is not predictive of future returns. Please see the last slide for important disclosures.

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Exhibit 1: Number of option-based funds included in the sample at year-end. Option-based funds benchmarked to a broad US equity index are included in the analysis. The "Other" category includes option-based closed-end, exchange traded and mutual funds which are excluded from the analysis since they have objectives other than broad-based US equities. These include fixed income, currencies, commodities, international and global equity, narrow sector funds (such as master limited partnerships), and futures based products (such as the VIX index). While CEF growth peaked in 2007, option-based mutual funds have been growing significantly in number since late-2008, and more recently, option-based ETFs have exhibited strong growth. While the exhibit only shows growth since 2000, the fund with the earliest inception date included in the study dates back to 1977.Sources: Morningstar and Bloomberg.From: paper by Keith Black and Ed Szado "Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs” (January 2015) www.cboe.com/funds

Please see the last slide for important disclosures.

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Exhibit 2: Cumulative monthly total return since January 1, 2000 for a monthly rebalanced equally weighted portfolio of Options-Based Funds, the BXM index and various traditional indices. Performance is scaled to represent a starting value of $100 at the market close on December 31, 1999 for all indices. Performance of the Equally Weighted Option-Based Fund Portfolio closely tracks the BXM index. The Equally Weighted Option-Based Fund Portfolio returns are calculated by averaging the returns across all constituents in the sample available at each month-end. The number of funds included in the calculation grows monthly as new funds enter the sample.Sources: Bloomberg and Morningstar

"Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs” (January 2015) Please see the last slide for important disclosures.

Options-Based Funds and Stock Indices –Cumulative Growth of $100

(Jan. 1, 2000 to Dec. 31, 2014)

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• Exhibit 4: In addition, Options-Based Funds had a lower standard deviation than the S&P 500 Index• Sources: Morningstar and Bloomberg.

"Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs” (January 2015) Please see the last slide for important disclosures.

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• Exhibit 12: The exhibit provides the annual average distribution yield calculated as the total distributions for each fund over a calendar year divided by the ending price of the fund for the previous year, and averaged across all funds in the Options-BasedFunds index.

• Sources: Morningstar and Bloomberg.

"Performance Analysis of Options-Based Equity Mutual Funds, CEFs, and ETFs” (January 2015) Please see the last slide for important disclosures.

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Notional Value of Average Daily Volume in S&P 500 Options (in $Billions) (2000 – 2015)

From: Black and Szado. “Performance Analysis of CBOE S&P 500 Option-Selling Indices” (2016). www.cboe.com/benchmarks

More than $190 billion per day in 2015

Fund managers examine trading liquidity and capacity when considering investment vehicles. The approximate daily notional value of trading in SPX options in 2015 can be estimated by multiplying the average daily volume times the value of the S&P 500 Index times the $100 options contract multiplier, for a value of more than $193 billion per day. Some investors use a delta-weighting multiplier to develop a more conservative estimate for notional value of options trading. Sources: Bloomberg and CBOE.

Do SPX options have capacity to handle $billions in new allocations from institutional investors?

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More Information

Please visit -• www.cboe.com/Funds Testimonials and white paper on funds• www.cboe.com/benchmarks Links to 30 benchmark indexes and

research papers• www.cboe.com/volatility 30 volatility indexes

CBOE Risk Management Conferences

• RMC Europe 2017: September in England

• RMC Asia 2017: December in Hind Kong

• RMC US 2018 in Florida

www.cboermc.com

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Important DisclosuresOptions involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive acopy of Characteristics and Risks of Standardized Options. Copies are available from your broker or from The OptionsClearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606 or at www.theocc.com. Theinformation in this presentation is provided for general education and information purposes only. No statement withinthis presentation should be construed as a recommendation to buy or sell a security or to provide investment advice.Supporting documentation for any claims, comparisons, statistics or other technical data in this presentation. isavailable by contacting CBOE at www.cboe.com/Contact. Any strategies discussed, including examples using actualsecurities and price data, are strictly for illustrative and educational purposes only and are not to be construed as anendorsement, recommendation or solicitation to buy or sell securities. In order to simplify the computations, commissions,fees, margin interest and taxes have not been included in the examples used in this presentation. These costs will impact theoutcome of all stock and options transactions and must be considered prior to entering into any transactions. Investors shouldconsult their tax advisor as to how taxes affect the outcome of contemplated options transactions. Past performance is notindicative of future results. The CBOE S&P 500 BuyWrite Index (BXM), CBOE S&P 500 2% OTM BuyWrite Index (BXY), CBOERussell 2000 BuyWrite Index (BXR), CBOE S&P 500 95-110 Collar Index (CLL) and CBOE S&P 500 PutWrite Index (PUT) (the“Indexes”) are designed to represent proposed hypothetical buy-write strategies. Like many passive benchmarks, the Indexes donot take into account significant factors such as transaction costs and taxes. Transaction costs and taxes for a buy-write strategycould be significantly higher than transaction costs for a passive strategy of buying-and-holding stocks. Investors attempting toreplicate the Indexes should discuss with their brokers possible timing and liquidity issues. Past performance does not guaranteefuture results. The methodology of the Indexes is owned by Chicago Board Options Exchange, Incorporated (CBOE). Thispresentation should not be construed as an endorsement or an indication by CBOE of the value of any non-CBOE product orservice described in this presentation. CBOE®, Chicago Board Options Exchange® and VIX® are registered trademarks andBXM, BXR, BXY, CLL, LOVOL, PUT, VXTH, BPVIX, JYVIX and TYVIX are servicemarks of CBOE. Standard & Poor's®, S&P®,and S&P 500® are registered trademarks of Standard & Poor’s Financial Services, LLC and are licensed for use by CBOE.Financial products based on S&P indices are not sponsored, endorsed, sold or promoted by Standard & Poor’s, and Standard &Poor’s makes no representation regarding the advisability of investing in such products. MSCI, and the MSCI index names areservice marks of MSCI Inc. ("MSCI") or its affiliates and have been licensed for use by CBOE. Option contracts on any MSCIindex (“Index Contracts”) are not sponsored, guaranteed or endorsed by MSCI, its affiliates or other parties involved in, or relatedto, making or compiling such MSCI index. Russell® and Russell 2000 are registered trademarks of the Frank Russell Company,used under license. All other trademarks and service marks are the property of their respective owners. © 2017 CBOE.All Rights Reserved.

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Appendix - Descriptions for Select CBOE Benchmark Indexes (1st page) www.cboe.com/benchmarks

Ticker CBOE Benchmark Index

1 BFLY

BFLY - CBOE S&P 500 Iron Butterfly Index - tracks the performance of a hypothetical option trading strategy that 1) sells a rolling monthly at-the-money (ATM) S&P 500 Index (SPX) put and call option; 2) buys a rolling monthly 5% out-of-the-money (OTM) SPX put and call option to reduce risk; and 3) holds a money market account invested in one-month Treasury bills, which is rebalanced on the option roll day and is designed to limit the downside return of the index

2 BXM BXM - CBOE S&P 500 Buy Write Index - tracks the performance of a hypothetical option trading strategy that purchases stocks in the S&P 500 index, and each month sell at-the-money (ATM) SPX index call options

3 BXMC

BXMC - CBOE S&P 500 Conditional BuyWrite Index - covered call strategy that holds a long position indexed to the S&P 500 Index and sells a monthly at-the-money (ATM) S&P 500 Index (SPX) call option. The written number of ATM call options will be either ½ unit or 1 unit and will be determined by the level of the CBOE Volatility Index (VIX Index) when the call option is written on the roll date. The BXMC Index rolls on a monthly basis, typically every third Friday of the month

4 BXMD BXMD - CBOE S&P 500 30-Delta BuyWrite Index is designed to track the performance of a hypothetical covered call strategy that holds a long position indexed to the S&P 500 Index and sells a monthly out-of-the-money (OTM) S&P 500 Index (SPX) call option. The call option written is the strike nearest to the 30 Delta at 10:00 a.m. CT on the Roll Date.

5 BXMW BXMW - CBOE S&P 500 Multi-Week BuyWrite Index - tracks the performance of a hypothetical weekly covered call strategy with staggered short positions in call options expiring in consecutive four week options. The BXMW Index is constructed as a combined portfolio of four mini BuyWrite indexes. Expirations are staggered so that the BXMW Index sells four-week options on a rolling weekly basis.

6 BXRC

BXRC - CBOE Russell 2000 Conditional BuyWrite Index is designed to track the performance of a hypothetical covered call strategy that holds a long position indexed to the Russell 2000 Index and sells a monthly at-the-money (ATM) Russell 2000 Index call option. The written number of ATM call options will be either ½ unit or one unit and will be determined by the level of the CBOE Russell Volatility Index (RVX Index) when the call option is written on the Roll Date. The BXRC Index rolls on a monthly basis, typically every third Friday of the month

7 BXRDBXRD - CBOE Russell 2000 30-Delta BuyWrite Index is designed to track the performance of a hypothetical covered call strategy that holds a long position indexed to the Russell 2000 Index and sells a monthly out of the money (OTM) Russell 2000 Index call option. The call option written is the strike nearest to the 30 Delta at 10:00 a.m. CT on the Roll Date. The BXRD Index rolls on a monthly basis, typically every third Friday of the month.

8 BXY BXY - CBOE S&P 500 2% OTM Buy Write Index - purchase stocks in the S&P 500 index, and each month sell SPX index call options that are 2% out-of-the-money

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Appendix - Descriptions for Select CBOE Benchmark Indexes (2nd page) www.cboe.com/benchmarks

Ticker CBOE Benchmark Index9 CLL CLL - CBOE S&P 500 95-110 Collar Index - purchase stocks in the S&P 500 index, and each month sell SPX call

options at 110% of the index value, and each quarter purchase SPX put options at 95% of the index value

10 CLLR

CLLR - CBOE Russell 2000 Zero-Cost Put Spread Collar Index is designed to track the performance of a hypothetical option trading strategy that 1) holds a long position indexed to the Russell 2000 Index; 2) on a monthly basis buys a 2.5 percent to 5 percent Russell 2000 Index put option spread; and 3) sells a monthly out-of-the-money (OTM) Russell 2000 call option to cover the cost of the put spread. The CLLR Index rolls on a monthly basis, typically every third Friday of the month.

11 CLLZ CLLZ - CBOE S&P 500 Zero-Cost Put Spread Collar Index - track the performance of a hypothetical option trading strategy that 1) holds a long position indexed to the S&P 500 Index; 2) on a monthly basis buys a 2.5% - 5% S&P 500 Index (SPX) put option spread; and 3) sells a monthly out-of-the-money (OTM) SPX call option to cover the cost of the put spread

12 CMBO

CMBO - CBOE S&P 500 Covered Combo Index - track a short strangle strategy collateralized by a portfolio holding a long position indexed to the S&P 500 Index and a fixed income account. The CMBO Index sells a monthly at-the-money (ATM) S&P 500 Index (SPX) put option and a monthly 2% out-of-the-money (OTM) SPX call option. The short SPX put position is collateralized by a money market account invested in one-month Treasury bills and the 2% OTM SPX call is collateralized by the long S&P 500 Index position.

13 CNDR

CNDR - CBOE S&P 500 Iron Condor Index - track the performance of a hypothetical option trading strategy that 1) sells a rolling monthly out-of-the-money (OTM) S&P 500 Index (SPX) put option (delta ≈ - 0.2) and a rolling monthly out-of-the-money (OTM) SPX call option (delta ≈ 0.2); 2) buys a rolling monthly OTM SPX put option (delta ≈ - 0.05) and a rolling monthly OTM SPX call option (delta ≈ 0.05) to reduce risk; and 3) holds a money market account invested in one-month Treasury bills, which is rebalanced on option roll days and is designed to limit the downside return of the index.

14 LOVOLLOVOL - CBOE Low Volatility Index - is a 40% / 60% blend of the popular CBOE S&P 500 BuyWrite Index (BXM) and CBOE VIX Tail Hedge Index (VXTH); the portfolio overlays long VIX calls and short S&P 500 calls over an investment in S&P 500 stocks

15 PPUT PPUT - CBOE S&P 500 5% Put Protection Index - strategy that holds a long position indexed to the S&P 500 Index and buys a monthly 5% out-of-the-money (OTM) S&P 500 Index (SPX) put option as a hedge

16 PUT PUT - CBOE S&P 500 PutWrite Index - purchase Treasury bills and sell cash-secured at-the-money put options on the S&P 500 index

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Appendix - Descriptions for Select CBOE Benchmark Indexes (3rd page) www.cboe.com/benchmarks

Ticker CBOE Benchmark Index

17 PUTRPUTR - CBOE Russell 2000 PutWrite Index is designed to track the performance of a hypothetical strategy that sells a monthly at-the-money (ATM) Russell 2000 Index put option. The written Russell 2000 put option is collateralized by a money market account invested in one-month Treasury bills. The PUTR Index rolls on a monthly basis, typically every third Friday of the month.

18 RXMRXM - CBOE S&P 500 Risk Reversal Index - is a benchmark index designed to track the performance of a hypothetical risk reversal strategy that: (1) buys a rolling out-of-the-money (delta ≈ 0.25) monthly SPX Call option; (2) sells a rolling out-of-the-money (delta ≈ - 0.25) monthly SPX Put option; and (3) holds a rolling money market account invested in one-month Treasury bills to cover the liability from the short SPX Put option position.

19 SMILESMILE - CBOE SMILE Index - combines a short one-month SPX 25 delta put with a one month 25 delta call. The call is held long or short depending on the shape of the smile, as summarized by the ratio of prices of the put and call. The option position is collateralized by an investment in one-month Treasury bills.

20 VPD VPD - CBOE VIX Premium Strategy Index - overlays a sequence of short one-month VIX futures on a money market account; the short VIX futures positions are held until expiration and new VIX futures are then sold

21 VPN VPN - CBOE Capped VIX Premium Strategy Index - tracks the performance of a strategy that systematically sells 1-month VIX futures, capped by the purchase of a VIX call option; the short VIX futures position is capped with long VIX calls struck about 25 points higher than the VIX futures price

22 VSTG VSTG - CBOE VIX Strangle Index - a premium capture index that overlays short VIX call and put options with a capped long VIX call option position. The position is collateralized by fixing the number of strangles such that 80% of capital is reserved.

23 VXTH VXTH - CBOE VIX Tail Hedge Index - buys and holds S&P 500 stocks, and also often buys 30-delta call options on the CBOE Volatility Index® (VIX®).

24 WPTRWPTR - CBOE Russell 2000 One-Week PutWrite Index is designed to track the performance of a hypothetical strategy that sells an ATM Russell 2000 Index put option on a weekly basis. The maturity of the written Russell 2000 put option is one week to expiry. The written Russell 2000 put option is collateralized by a money market account invested in one-month Treasury bills. The WPTR Index rolls on a weekly basis, typically every Friday.

25 WPUT WPUT - CBOE S&P 500 One-Week PutWrite Index - track the performance of a hypothetical strategy that sells an at-the-money (ATM) S&P 500 Index (SPX) put option on a weekly basis. The maturity of the written SPX put option is always one week to expiry. The written SPX put option is collateralized by a money market account invested in one-month Treasury bills.