Cboe Global Markets

How Cboe European Indices Performed Since 2010

Matt Moran
▬
May 1, 2024

Cboe Europe Derivatives (CEDX) is a pan-European marketplace that enables eligible participants to access a vibrant equity derivatives market through a single access point, creating efficiencies in trading and clearing. Among its offerings are futures on these 10 indices:

Indices are a helpful way to gauge economic performance, and futures on Cboe European indices offer exposure to the region each index tracks. Understanding the index’s performance before trading futures is essential to developing an informed strategy. As shown in the table above, the Cboe Netherlands 25 Index  had the highest annualized return and the highest Sharpe Ratio, compared to the other indices listed. Notably, the index’s largest constituent company is the semiconductor company ASML, which was deemed one of Europe’s leading “Granolas” stocks, according to stories CNN and the Financial Times. Additionally, the Technology Sector was the largest in the index, with a 33% weighting.

The Cboe UK 100 Index had the smoothest returns with the lowest standard deviation of 12.3%. Its largest sector was Finance, with a 16% weighting. The Cboe Italy 40 Index had higher volatility and the highest standard deviation at 20.8%. Its largest sector is Finance, with a weighting of 39%.

Index Performance Since 2010

The charts below show that the Cboe Netherlands 25 Index (BNL25P), Cboe Sweden 30 Index (BSE30P), and Cboe France 40 Index (BFR40P) indices rose more than 140% between September 2010 and March 2024.: 

European Country Stock Indices Since 2010

European Stock Indices Since 2010

As shown in the heat map below, there is quite a bit of variability among the annual performance of these indices over the past six years.

Peak-to-Trough Drawdowns

The  chart below shows that the worst peak-to-trough drawdowns for these indices between October 2010 and March 2024 were:

  • The Cboe UK 100 Index | Down 28.47%  
  • The Cboe Germany 40 Index | Down 30.66%
  • The Cboe Spain 35 Index | Down 43.32%

Drawdowns (Oct. 2010 – March 2024)

Month-end data for price return indices are used. Source: Cboe Global Markets.

 Certain futures strategies may have the potential to mitigate the risks of severe peak-to-trough drawdowns.

 Strategies and Use of Index Products

Index futures allow investors to purchase or sell a specific underlying index at a certain value on a future date. There are a number of different index futures strategies investors can deploy to achieve different investment goals. Here are a few examples:

Bullish Strategy – Long Index Futures

An investor who anticipates rising values for a stock index may buy index futures contracts with a long position in the contracts. As shown in the heat map table above, the Cboe Eurozone 50 Index (BEZ50P) rose more than 22% in 2019 and 2021. If the index value rises, there is potential for profit on the difference between the lower purchase price and the higher selling price for the futures. If the index values fall, there is a risk of loss.

Hedging Strategy – Short Index Futures

Investors who hold broad stock portfolios for different countries and are very concerned about the possibility of a bear market in the near future may consider the strategy of selling index futures, or taking a short position in index futures. As shown in the heat map table above, the Cboe Eurozone 50 Index (BEZ50P) fell more than 12% in 2011, 2018, and 2022. For investors who properly hedge equity portfolios with short index futures positions, upside potential during rising markets is limited, and downside risk during bear markets may be mitigated.

Additional protective strategies can be found here and income-enhancing strategies can be found here.

More About CEDX and European Futures

Here is more information about Cboe Europe Derivatives (CEDX)

  • Single Access Point | Access a modern, efficient pan-European derivatives marketplace through a single access point, streamlining operational costs
  • On-screen Liquidity | CEDX promotes deep and liquid on-screen markets through attractive incentive schemes and in-built protections for market-makers
  • Clearing Efficiencies | All trades on CEDX clear via Cboe Clear Europe, a leading pan-European clearing house, offering margin efficiencies across cash equities and equity derivatives positions.

More Information

Learn more about Cboe Global Indices and related futures strategies

 

 

 Disclaimer: This information is not being provided as part of an offer or sale of any futures or options products to any persons located within the United States.

There are important risks associated with transacting in any of the Cboe Company products or any digital assets discussed here. Before engaging in any transactions in those products or digital assets, it is important for market participants to carefully review the disclosures and disclaimers contained at: https://www.cboe.com/us_disclaimers/. These products and digital assets are complex and are suitable only for sophisticated market participants. These products involve the risk of loss, which can be substantial and, depending on the type of product, can exceed the amount of money deposited in establishing the position. Market participants should put at risk only funds that they can afford to lose without affecting their lifestyle. © 2024 Cboe Exchange, Inc. All Rights Reserved.

 

Indices Europe

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