S&P GSCI Covered

Call Select Index

Methodology

July 2014
S&P Dow Jones Indices: Index Methodology

Table of Contents
Introduction

3
Highlights

The S&P GSCI Covered Call Select Index Methodology

Definitions

Index Construction

Approaches

Index Calculations

Index Maintenance

10

Rebalancing

10

Inclusion Criteria

10

Index Governance
Index Committee

Index Policy

11
11

12
Announcements

Index Dissemination
Tickers

S&P Dow Jones Indices Contact Information

12

13
13

14

Index Management

14

Product Management

14

Media Relations

14

Client Services

14

Disclaimer

15

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

S&P Dow Jones Indices shall have no liability, contingent or otherwise, to any person or
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Methodology, or for delays, omissions or interruptions in the delivery of the S&P GSCI
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any liability for any special, punitive, indirect, or consequential damages (including lost
profits), in connection with any use by any person of the S&P GSCI or any products
based on or indexed or related thereto, even if notified of the possibility of such damages.

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

Introduction
The S&P GSCI Covered Call Select Index (the Index) seeks to simulate a covered call
strategy on a select number of the commodities from the S&P GSCI with the most active
options markets.
This methodology was created by S&P Dow Jones Indices to achieve the aforementioned
objective of measuring the underlying interest of each index governed by this
methodology document. Any changes to or deviations from this methodology are made in
the sole judgment and discretion of S&P Dow Jones Indices so that the index continues to
achieve its objective.
Highlights
A covered call strategy is an income generating strategy that is generally used in a
neutral-to-bullish market environment, where a slow and steady rise in market prices is
anticipated.
Ten commodities are included in the S&P GSCI Covered Call Select Index -- Coffee,
Corn, Cotton, Crude Oil, Gold, Natural Gas, Silver, Soybeans, Sugar and Wheat.
For each of the commodities included in the Index, a separate covered call index is
created. Each such index reflects an investment in the rolling active futures contract and
the systematic writing (selling) of out-of-the-money (OTM) calls on the same contract.
Each such index seeks to provide higher returns than the corresponding S&P GSCI index
of the same commodity, with lower volatility in most market environments with the
exception of when the futures market is rallying rapidly.
The ten individual covered call indices are, then, included in a composite covered call
index, on an equal-weighted basis.
The S&P GSCI Covered Call Select Index Methodology
This methodology uses various terms and definitions from the S&P GSCI Index
Methodology. Where not specifically noted otherwise in this document, the rules of the
S&P GSCI Methodology will prevail. Where the terms in this document are also defined
in the S&P GSCI Methodology, the definitions in this document prevail.

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

Definitions
Call option. A contract between a buyer and seller whereby the buyer acquires the right,
but not the obligation, to purchase a specific security at a fixed price on or before a
specified date. The seller of the call assumes the obligation of delivering the security.
Strike price. The price at which the underlying will be delivered in the event the option
is exercised.
Volatility. The degree to which the price of an underlying security tends to fluctuate
over time.

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

Index Construction
Approaches
Each of the individual covered call indices is calculated on a hypothetical portfolio
consisting of a long futures position and a short OTM call position, both of which are
rolled based on the S&P GSCI Covered Call Designated Contract Expiration calendar
(Table 1). The futures and options roll over a five-day period, starting on the first
business day of each month.
Index Calculations
Calculating the Total Return of the Portfolio of an individual covered call index
The index is calculated based on the total return of a hypothetical portfolio consisting of a
long futures position and a short OTM call. If its not during a roll period, the return and
the index value are calculated as follows:

Rt =

Ft C t
1
Ft 1 C t 1

I t = I t 1 ( 1 + Rt )

(1)

where:
Rt = Index return on day t
It = Index level on day t
Ft = Closing price of the futures contract on day t
Ft-1 = Closing price of the futures contract on day t-1
Ct = Closing price of the call option on day t
Ct-1 = Closing price of the call option on day t-1
Five Day Roll
Commodity futures and options are not held to maturity. Instead, the long futures and
short options positions roll to the next Designated Contract Expiration Month over a fiveday period, with 20% being replaced every business day. The roll period is the first five
business days of each month. The option chosen to be rolled into is always based on the
same contract month as the futures that are being rolled into. With the substitution of the
roll during the 1st through the 5th business days for the S&P GSCI Covered Call Select
index, the roll rules and procedures followed are those as specified in the S&P GSCI
Methodology, sections VI.2(b), VI.2 (c) and VI.2 (d).

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

Table 1: Contracts Included in the S&P GSCI Covered Call Select Index
Covered Call Futures and Options Roll Schedule
Trading
Facility

Commodity
(Contract)

Ticker

NYM / ICE
NYM / ICE
CBT
CBT
CBT
ICE - US
ICE - US
ICE - US
CMX
CMX

Oil (WTI Crude)

Natural Gas
Wheat (Chicago)
Corn
Soybeans
Sugar #11
Coffee "C"
Cotton #2
Gold
Silver

CL
NG
W
C
S
SB
KC
CT
GC
SI

Designated Contract Expirations during the Month

(Note 1)

Month: 1
H0
H0
H0
H0
H0
H0
H0
H0
G0
H0

2
J0
J0
H0
H0
H0
H0
H0
H0
J0
H0

3
K0
K0
K0
K0
K0
K0
K0
K0
J0
K0

4
M0
M0
K0
K0
K0
K0
K0
K0
M0
K0

5
N0
N0
N0
N0
N0
N0
N0
N0
M0
N0

6
Q0
Q0
N0
N0
N0
N0
N0
N0
Q0
N0

7
U0
U0
U0
U0
X0
V0
U0
Z0
Q0
U0

8
V0
V0
U0
U0
X0
V0
U0
Z0
Z0
U0

9
X0
X0
Z0
Z0
X0
V0
Z0
Z0
Z0
Z0

10
Z0
Z0
Z0
Z0
X0
H1
Z0
Z0
Z0
Z0

Note 1: Future and option Months included in the S&P GSCI Covered Call Select Index that are rolled into during the
calendar month, starting with January 2010. Month letter codes are shown in Table 2.

Table 2: Month Letter Codes

Month
January
February
March
April
May
June
July
August
September
October
November
December

Letter Code
F
G
H
J
K
M
N
Q
U
V
X
Z

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

11
F1
F1
Z0
Z0
F1
H1
Z0
Z0
Z0
Z0

12
G1
G1
H1
H1
F1
H1
H1
H1
G1
H1

Determining the Strike of the Call Option

For each commodity included in the S&P GSCI Covered Call Select Index, the strike
price of the call option to be rolled into the next Eligible Contract Month is based on the
market price level implied by the realized volatility of the respective futures market.
After the close of the last trading day of each rebalancing month, the annualized realized
volatility of the past 21 trading days of the respective S&P GSCI Spot Index is
calculated. The 21-day realized (historical) volatility is calibrated with the number of
calendar days left to expiration in the option contract month to be rolled into. We denote
this as vol.

ri =

Si
1
S i 1

ri =

1 20
ri j
21 j =0

stdev =

1 20
( ri j ri ) 2

20 j =0

realized volatility = stdev * 252

vol = realized volatility *

# calendar days to expire

365

(2)

where:
Si = Closing price of the S&P GSCI Spot Index on the ith trading day
ri = Daily return of the S&P GSCI Spot Index on the ith trading day

ri = The 21-day average daily return of the S&P GSCI Spot Index on the ith trading
day
The strike of the new call option, K, is 1 vol above the close of the futures contract to be
rolled into on the last trading day of each month.

K = Ft new (1 + vol )

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

(3)

where:
Ft new = Closing price of the futures contract to be rolled into.
If the calculated strike price, K, falls between two option strikes, the call option that is
immediately above K is chosen
An example of strike determination, for Crude Oil:
Date: April 30th 2009
The index will begin rolling into the July futures and options on May 1st 2009
July crude oil futures settlement price on April 30th = $52.28/bbl
21-day historic volatility of the S&P GSCI Spot Crude Oil Index on April 30th =
54.73%
Calendar days to options expiration on April 30th = 48 days
Target strike = $52.28/bbl + (52.28 * 54.73% * sqrt(48 / 365)) = $62.66/bbl
On May 1st, the index begins rolling into a long position in the July futures and a
short position in the July 63 calls.
Five-Day Staggered Roll
The roll period starts on the first business day of each calendar month. With each
successive day, 20% of the expiring futures and options are replaced by the new contracts
at the close and assumed official settlement prices. Exhibit 1 shows an example of the
weights of the two maturities.

Exhibit 1: Five Day Roll Example

Date
5/29/2009
6/1/2009
6/2/2009
6/3/2009
6/4/2009
6/5/2009

Roll Out
200907
200907
200907
200907
200907
200907

Weight
100%
80%
60%
40%
20%
0%

Roll In Weight
0%
200908
20%
200908
40%
200908
60%
200908
80%
200908 100%

The return of the portfolio and the index value are calculated as follows:
new
C tnew )
Wt old1 ( Ft old C told ) + Wt new
1 ( Ft
1
Rt = old old
new
new
new
Wt 1 ( Ft 1 C told
1 ) + Wt 1 ( Ft 1 C t 1 )

(4)

I t = I t 1 ( 1 + Rt )
where:
Wt new = Weight of the new futures / options
Ft new = Closing price of the new futures

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

Ct new = Closing price of the new call option

Wt old = Weight of the old futures / options
Ft old = Closing price of the new futures
Ct old = Closing price of the old call option
Calculating the Total Return of the Portfolio of the set of covered call indices
The composite index is calculated using the total returns of the individual covered call
indices, weighted by their respective daily weights. Initially the ten commodities are
allocated equal weights and are reset annually during the January roll period. The return
and the index value of the portfolio of the set of covered call indices are calculated as
follows:

PRt = ( Rtc DWt c )

c

PI t = PI t 1 (1 + PRt )
where:
PRt = Total Return of the Portfolio on day t
PIt = Portfolio Index on day t
Rt c = Return of Commodity c on day t
DWt c= Daily Weight of Commodity c on day t

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

Index Maintenance
Rebalancing
The S&P GSCI Covered Call Select Index and its representative constituents are
reviewed on an annual basis along with the parent S&P GSCI during the January roll
period. Weights used in the composite index are reset to equal once a year, on the S&P
GSCI Business Day prior to the beginning of the January roll period.
Inclusion Criteria
The S&P GSCI Covered Call Select Index selects its constituents from the S&P GSCI
candidates. Commodity candidate annual options volume must be a minimum of 10% of
the underlying commodity annual volume to be considered for inclusion in the S&P
GSCI Covered Call Select Index. The S&P GSCI annual volume measurement period is
generally from September to August of the most recent prior year at each January review.

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

10

Index Governance
Index Committee
The S&P GSCI Committee maintains the S&P GSCI Covered Call Select Index. The
Index Committee meets regularly. At each meeting, the Index Committee reviews any
significant market events. In addition, the Index Committee may revise index policy for
timing of rebalancings or other matters.
S&P Dow Jones Indices considers information about changes to its indices and related
matters to be potentially market moving and material. Therefore, all Index Committee
discussions are confidential.
For information on Quality Assurance and Internal Reviews of Methodology, please refer
to S&P Dow Jones Indices Commodities Indices Policies & Practices document located
under the Resource Center on our Web site, www.spdji.com.

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

11

Index Policy
Announcements
Announcements of the daily index values are made after the futures market close each
day.
Announcements of the new call strike price to be rolled into are made following the close
of business on the last business day of each month.
The index is calculated daily when the various commodity exchanges are open for
official trading and official settlement prices are provided, excluding holidays and
weekends.
In situations where an exchange is forced to close early due to unforeseen events, such as
computer or electric power failures, weather conditions or other events, S&P Dow Jones
Indices will calculate the value of the index based on most recent option price published.
If an exchange fails to open due to unforeseen circumstances, S&P Dow Jones Indices
may determine not to publish the index for that day.
For information on Calculations and Pricing Disruptions, Expert Judgment, Data
Hierarchy and Unexpected Exchange Closures, please refer to S&P Dow Jones Indices
Commodities Indices Policies & Practices document located under the Resource Center
on our Web site, www.spdji.com.

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

12

Index Dissemination
Historical index returns are available through S&P Dow Jones Indices index data group
for subscription via FTP.
Tickers
Index
S&P GSCI Covered Call Select Index Spot
S&P GSCI Covered Call Select Index Excess Return
S&P GSCI Covered Call Select Index Total Return
S&P GSCI Covered Call Chicago Wheat Index Spot
S&P GSCI Covered Call Chicago Wheat Index Excess Return
S&P GSCI Covered Call Chicago Wheat Index Total Return
S&P GSCI Covered Call Corn Index Spot
S&P GSCI Covered Call Corn Index Excess Return
S&P GSCI Covered Call Corn Index Total Return
S&P GSCI Covered Call Soybeans Index Spot
S&P GSCI Covered Call Soybeans Index Excess Return
S&P GSCI Covered Call Soybeans Index Total Return
S&P GSCI Covered Call Sugar Index Spot
S&P GSCI Covered Call Sugar Index Excess Return
S&P GSCI Covered Call Sugar Index Total Return
S&P GSCI Covered Call Crude Oil Index Spot
S&P GSCI Covered Call Crude Oil Index Excess Return
S&P GSCI Covered Call Crude Oil Index Total Return
S&P GSCI Covered Call Natural Gas Index Spot
S&P GSCI Covered Call Natural Gas Index Excess Return
S&P GSCI Covered Call Natural Gas Index Total Return
S&P GSCI Covered Call Gold Index Spot
S&P GSCI Covered Call Gold Index Excess Return
S&P GSCI Covered Call Gold Index Total Return
S&P GSCI Covered Call Silver Index Spot
S&P GSCI Covered Call Silver Index Excess Return
S&P GSCI Covered Call Silver Index Total Return
S&P GSCI Covered Call Coffee Index Spot
S&P GSCI Covered Call Coffee Index Excess Return
S&P GSCI Covered Call Coffee Index Total Return
S&P GSCI Covered Call Cotton Index Spot
S&P GSCI Covered Call Cotton Index Excess Return
S&P GSCI Covered Call Cotton Index Total Return

S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

Bloomberg
SPCLCI
SPCLCIP
SPCLCITR
SPCLWH
SPCLWHP
SPCLWHTR
SPCLCN
SPCLCNP
SPCLCNTR
SPCLSO
SPCLSOP
SPCLSOTR
SPCLSB
SPCLSBP
SPCLSBTR
SPCLCL
SPCLCLP
SPCLCLTR
SPCLNG
SPCLNGP
SPCLNGTR
SPCLGC
SPCLGCP
SPCLGCTR
SPCLSI
SPCLSIP
SPCLSITR
SPCLKC
SPCLKCP
SPCLKCTR
SPCLCT
SPCLCTP
SPCLCTTR

13

S&P Dow Jones Indices Contact Information

Index Management
David M. Blitzer, Ph.D. Managing Director & Chairman of the Index Committee
david.blitzer@spdji.com
+1.212.438.3907
Mark Berkenkopf Associate Director
mark.berkenkopf@spdji.com
+1.609.520.7895
Product Management
Jodi Gunzberg Vice President
jodie.gunzberg@spdji.com
Marya Alsati-Morad Associate Director
marya.alsati-morad@spdji.com

+1.212.438.1560
+1.212.438.2308

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+1.212.438.1471

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or
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S&P Dow Jones Indices: S&P GSCI Covered Call Select Index Methodology

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