The Chicago Board Options Exchange (CBOE) has launched the CBOE-SMA Large Cap Index (SMLC Index), the first of a series of sentiment-based strategy indices that tracks stocks according to their social media noise. The index is based on research from social media intelligence gatherer Social Market Analytics (SMA).

The CBOE-SMA Large Cap Index uses a proprietary analytics model to track the 25 stocks with the most bullish sentiment on Twitter.

The index tracks the performance of an equally weighted portfolio of 25 large-cap US-listed stocks with high SMA S-Scores. S-Scores, extracted from Twitter traffic using algorithms designed by SMA, reflect investors’ sentiment about a particular stock and are believed to be predictive market signals.

The index is constituted daily from CBOE’s large-cap universe which represents the top 15% (approximately 450 stocks) capitalization tranche of underlying shares for options listed on CBOE. Each firm has a market cap greater than or equal to $10bn.

The index is calculated by CBOE each business day at 3:00pm CT. The hypothetical value of the index is held in cash until 8:30am the following business day, when it is reinvested in the next SMLC portfolio.

Between October 2014 and June 2016, approximately 70% of CBOE’s large-cap universe stocks had been included in the SMLC Index portfolio, indicating the high turnover rate of the strategy.

As of the end of June 2016 the index was up 64.9% year-to-date, significantly above the 11.1% return on the S&P 500 Index over the same period. The index has, however, shown slightly greater volatility than the S&P 500.

The principles of the strategy are similar to those underlying the Sprott BUZZ Social Media Insights ETF (NYSE Arca: BUZ). The fund tracks the BUZZ Social Media Insights Index which, on a monthly basis, identifies the 100 “most talked about” stocks on social media platforms, ranks them using a proprietary analytics model, and selects the 25 stocks with the most bullish insight scores to be included in the index.