Futures and options trading on growth and value indexes managed by Standard & Poor's Corp. and BARRA Inc. began trading Nov. 6 on the Chicago Mercantile Exchange and the Chicago Board Options Exchange, both in Chicago.
The contracts are based on the S&P 500/BARRA Growth Index and the S&P 500/BARRA Value Indexes, which are jointly run by S&P, New York, and BARRA, Berkeley, Calif. The indexes represent the respective growth and value stocks within the S&P 500.
The contracts are getting particular attention from investors using tactical asset allocation strategies, who will be able to adjust portfolios using style bets. If a TAA manager thinks growth stocks are moving out of favor relative to value stocks, the manager can sell the growth contracts and buy value, adjusting a portfolio's allocation, but leaving the underlying stocks undisturbed.
Christopher G. Luck, director of equity marketing at First Quadrant Corp., Pasadena, Calif., said the contracts would be ideal for domestic TAA strategies, provided volume grows to a great enough level to support institutional trading.
Richard H. Redding, vice president in index products marketing for the CME, said the contracts create nice arbitrage opportunities between the growth and value contracts and the various S&P 500 futures and options.