CBOE Options Exchange Definition

What is the CBOE Options Exchange?

Founded in 1973, the CBOE Options Exchange is the largest in the world options swap with contracts based on individual stocks, indices and interest rate.

Originally known as the Chicago Board Options Exchange (CBOE), the exchange changed its name in 2017 as part of a rebranding effort by its holding company, CBOE Global Markets. Traders call the exchange the CBOE (“see-bo”). CBOE is also behind the CBOE Volatility Index (VIX)the most widely used and recognized proxy for market volatility.

Key points to remember

  • The CBOE is a major Chicago-based options exchange, founded in 1973.
  • The CBOE Options Exchange was formerly the Chicago Board Options Exchange (CBOE).
  • In 2010, the exchange incorporated as a holding company with the exchange as its main asset.
  • In 2017, the holding company and the exchange were renamed CBOE Global Markets Inc. and CBOE Options Exchange respectively.
  • The CBOE hosts the VIX Volatility Index and many other volatility instruments.

Understanding the CBOE Options Exchange

CBOE offers trading across multiple asset classes and geographies, including options, futures contractsAmerican and European stocks, exchange-traded products (ETPs), global foreign exchange (FX), and multi-asset volatility products. It is the largest options exchange in the United States and the largest exchange in Europe, by traded value. It is the second largest exchange operator in the United States and one of the world’s leading markets for ETP trading.

The exchange has a rich history, including the founding of the CBOE Clearing Corp., which later became the Options Clearing Corporation (OCC)industry clearing house for all US options trades.

The business of the CBOE goes beyond mere commerce executions, and in 1985 he formed The Options Institute, its educational arm, developed to educate investors around the world about options. Additionally, the company offers seminars, webinars, and online courses, including training for professionals.

CBOE Products

The exchange offers access to many diverse products, starting with, of course, put and call options on thousands of publicly traded stocks, as well as exchange-traded funds (ETFs) and exchange-traded notes (ETNs). Investors typically use these products to cover and generating revenue through the sale of covered calls or guaranteed cash puts.

There are options available on stock and sector indices, including the Standard & Poor’s 500S&P100, Dow Jones Industrial AverageRussell indices, selected FTSE index, Nasdaq Index, MSCI Indices and sector indices including the 10 sectors contained in the S&P 500.

The exchange offers social media indices and specialized indices covering several options strategies, such as “put write”, butterflyand necklace.

Finally, the VIX index is the first barometer of the equity market volatility. This index is based on the real-time prices of near money options on the S&P 500 Index (SPX) and is designed to reflect the consensus opinion of investors on the expected future (30 day) volatility of the stock market. Traders refer to the VIX index as the “fear gauge” because it tends to climb to very high levels when investors believe the market is very bearish or unstable.

The VIX Index is also the flagship index of CBOE Global Markets’ volatility franchise. This includes volatility indices on broad equity indices, ETFs, individual stocks, goodsand other specialized indexes.

The CBOE created the VIX index in 1993. It has since become the de facto barometer of US stock market volatility.

How many options contracts are traded on the CBOE?

In the first quarter of 2022, the total volume on the CBOE options exchanges reached 830.3 million options contracts, a record amount. Quarterly average daily volume (ADV) also reached a new all-time high of 13.4 million contracts traded per day.

When were put options first listed on the CBOE?

When the CBOE was launched in 1973, it only listed call options. It wasn’t until 1977 that the exchange added put options as well.

When were LEAP options first listed on the CBOE?

LEAP (Long Term Anticipation Securities) are exchange-listed long-term options, with expirations of more than one year and up to three years or more. The CBOE first introduced listed LEAP trading in 1990.

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