What Is the CBOE Options Exchange?
Let me tell you about the CBOE Options Exchange, which was founded in 1973 and stands as the world's largest options exchange, with contracts centered on individual equities, indexes, and interest rates.
It was originally called the Chicago Board Options Exchange, or CBOE, but in 2017, as part of a rebranding by its holding company CBOE Global Markets, it became the CBOE Options Exchange. Traders still call it CBOE, pronounced 'see-bo'. This exchange also created the CBOE Volatility Index, known as the VIX, which is the most widely used measure of market volatility.
Key Takeaways
You should know that the CBOE is a major options exchange in Chicago, established in 1973. It used to be known simply as the Chicago Board Options Exchange. In 2010, it became a holding company with the exchange as its core asset. Then in 2017, the holding company rebranded to CBOE Global Markets Inc., and the exchange itself to CBOE Options Exchange. Importantly, it's the home of the VIX volatility index and various other volatility tools.
Understanding the CBOE Options Exchange
CBOE provides trading across a range of asset classes and regions, including options, futures, U.S. and European equities, exchange-traded products, global foreign exchange, and multi-asset volatility products. It's the biggest options exchange in the U.S. and the largest stock exchange in Europe by value traded. It ranks as the second-largest stock exchange operator in the U.S. and a leading global market for ETP trading.
The exchange has a significant history, such as creating the CBOE Clearing Corp., which evolved into the Options Clearing Corporation, the clearinghouse for all U.S. options trades.
Beyond just executing trades, CBOE established The Options Institute in 1985 as its educational branch to teach investors worldwide about options. They also run seminars, webinars, and online courses, including professional-level training.
CBOE Products
The exchange gives you access to a wide array of products, starting with put and call options on thousands of publicly traded stocks, plus ETFs and ETNs. Investors often use these for hedging or generating income via covered calls or cash-secured puts.
Options are available on stock and sector indexes like the S&P 500, S&P 100, Dow Jones Industrial Average, Russell indexes, selected FTSE indexes, Nasdaq Indexes, MSCI Indexes, and the 10 sectors in the S&P 500.
You'll also find social media indexes and specialty indexes for strategies such as put write, butterfly, and collar.
At the core is the VIX index, the leading indicator of equity market volatility. It's calculated from real-time prices of near-the-money options on the S&P 500 and reflects investors' expectations for 30-day stock market volatility ahead. Traders nickname it the 'fear gauge' because it surges when the market seems bearish or unstable.
The VIX is the flagship of CBOE Global Markets' volatility offerings, which include indexes on broad stock indexes, ETFs, individual stocks, commodities, and other specialty areas.
Fast Fact
Here's a quick note: The CBOE introduced the VIX Index in 1993, and it has since become the standard measure of U.S. equity market volatility.
How Many Options Contracts Trade on the CBOE?
In the first quarter of 2022, total volume on CBOE's options exchanges hit a record 830.3 million contracts. The quarterly average daily volume also set a new high at 13.4 million contracts per day.
When Were Put Options First Listed on the CBOE?
When CBOE started in 1973, it only offered call options. Put options were added in 1977.
When Were LEAP Options First Listed on the CBOE?
LEAPs, or Long-Term Anticipation Securities, are long-dated options with expirations over one year, up to three or more years. CBOE first listed them in 1990.
Disclaimer
Keep in mind that this information isn't tax, investment, or financial advice. It's presented without regard to any specific investor's objectives, risk tolerance, or financial situation, and it may not suit everyone. Investing carries risks, including potential loss of principal.
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