Chicago Board Options Exchange
Encyclopedia
The Chicago Board Options Exchange , located at 400 South LaSalle Street
in Chicago, is the largest U.S. option
s exchange with annual trading volume that hovered around one billion contracts at the end of 2007. CBOE offers options on over 2,200 companies, 22 stock indices, and 140 exchange-traded fund
s (ETFs).
The Chicago Board of Trade
established the Chicago Board Options Exchange in 1973. The first exchange to list standardized, exchange-traded stock options began its first day of trading on April 26, 1973, in a celebration of the 125th birthday of the Chicago Board of Trade. The CBOE is regulated by the Securities and Exchange Commission.
(OCC). As of approximately April 11, 2007, the Wall Street Journal estimates that globally the market capitalization of the derivatives markets (futures, options, swaps, etc.) exceeds 450 trillion dollars (while US stock exchanges have approximately 30 trillion and the rest of the worlds stock exchanges total to about another 20 trillion, to a total of about 50 trillion--while the global fixed income markets total to roughly 65 trillion).
In 2004, CBOE opened trading on the CBOE Futures Exchange for volatility and variance contracts and in 2007 launched a Reg NMS-compliant stock exchange
called the CBOE Stock Exchange (CBSX) to compete with the NYSE, Nasdaq
, and other regional exchanges.
Trading at CBOE is carried out by way of the exchange's Hybrid system, which enables customers to choose how their orders are handled – either electronically or through open outcry
. About 95 percent of CBOE orders are traded electronically, which equates to between 50 and 60 percent of the exchange's total business. The remaining transactions, traded via open outcry, typically are large or complex institutional orders that use the skills of floor brokers to "work the order" to gain potential price improvement.
On March 11, 2010, CBOE filed paperwork to launch an initial public offering
.
The CBOE calculates and disseminates the CBOE Volatility Index (VIX
), the CBOE S&P 500 BuyWrite Index (BXM)
, and other indexes.
LaSalle Street
LaSalle Street is a major north-south street in Chicago named for Sieur de La Salle, an early explorer of Illinois. The portion that runs through the Loop is considered to be Chicago's financial district...
in Chicago, is the largest U.S. option
Option (finance)
In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
s exchange with annual trading volume that hovered around one billion contracts at the end of 2007. CBOE offers options on over 2,200 companies, 22 stock indices, and 140 exchange-traded fund
Exchange-traded fund
An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE...
s (ETFs).
The Chicago Board of Trade
Chicago Board of Trade
The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...
established the Chicago Board Options Exchange in 1973. The first exchange to list standardized, exchange-traded stock options began its first day of trading on April 26, 1973, in a celebration of the 125th birthday of the Chicago Board of Trade. The CBOE is regulated by the Securities and Exchange Commission.
Operations
CBOE's options contracts are cleared by the Options Clearing CorporationOptions Clearing Corporation
Options Clearing Corporation or OCC, founded in 1973, is the world's largest equity derivatives clearing organization, providing central counterparty clearing and settlement services to 14 exchanges and platforms for options, financial and commodity futures, security futures and securities...
(OCC). As of approximately April 11, 2007, the Wall Street Journal estimates that globally the market capitalization of the derivatives markets (futures, options, swaps, etc.) exceeds 450 trillion dollars (while US stock exchanges have approximately 30 trillion and the rest of the worlds stock exchanges total to about another 20 trillion, to a total of about 50 trillion--while the global fixed income markets total to roughly 65 trillion).
In 2004, CBOE opened trading on the CBOE Futures Exchange for volatility and variance contracts and in 2007 launched a Reg NMS-compliant stock exchange
Stock exchange
A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...
called the CBOE Stock Exchange (CBSX) to compete with the NYSE, Nasdaq
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
, and other regional exchanges.
Trading at CBOE is carried out by way of the exchange's Hybrid system, which enables customers to choose how their orders are handled – either electronically or through open outcry
Open outcry
Open outcry is the name of a method of communication between professionals on a stock exchange or futures exchange. It involves shouting and the use of hand signals to transfer information primarily about buy and sell orders...
. About 95 percent of CBOE orders are traded electronically, which equates to between 50 and 60 percent of the exchange's total business. The remaining transactions, traded via open outcry, typically are large or complex institutional orders that use the skills of floor brokers to "work the order" to gain potential price improvement.
On March 11, 2010, CBOE filed paperwork to launch an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
.
Contracts offered
The CBOE (and other national options exchanges) offers options on the following, and others:- S&P 500S&P 500The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
Index (ticker SPX) - S&P 100S&P 100The S&P 100 Index is a stock market index of United States stocks maintained by Standard & Poor's.Index options on the S&P 100 are traded with the ticker symbol "OEX". Because of the popularity of these options, investors often refer to the index by its ticker symbol.The S&P 100, a subset of the...
Index (OEX) - Dow Jones Industrial AverageDow Jones Industrial AverageThe Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...
(DJX) - NASDAQ-100NASDAQ-100The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...
Index (NDX) - Russell 2000Russell 2000The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index.The Russell 2000 is by far the most common benchmarkfor mutual funds that identify themselves as "small-cap",...
Index (RUT) - S&P 500 Depositary Receipts - SPDRsStandard & Poor's Depositary ReceiptsThe Standard & Poor's Depositary Receipts were launched by Boston asset manager SSgA State Street Global Advisors on January 29, 1993 as the first exchange-traded fund in the United States ; and are part of the SPDRs ETF chain.Designed and developed by American Stock Exchange executives Nathan Most...
(SPY) - NASDAQ-100NASDAQ-100The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...
Trust (QQQQ) - Nasdaq CompositeNasdaq CompositeThe Nasdaq Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market, meaning that it has over 3,000 components. It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. ...
(ONEQ) - S&P Latin American 40 (ILF)
- S&P MidCap 400S&P 400The S&P 400 MidCap Index, more commonly known as the S&P 400, is a stock market index from Standard & Poor's.It covers roughly the mid-cap range of US stocks.-Investing:The following ETFs attempt to track this index and sub-indexes:*Index Fund: &...
(MDY, IJH, and CBOE root symbol MID) - Cohen & Steers Realty Majors Index (ICF)
- Wilshire 5000Wilshire 5000The Wilshire 5000 Total Market Index, or more simply the Wilshire 5000, is a market-capitalization-weighted index of the market value of all stocks actively traded in the United States. Currently, the index contains over 4,100 components...
(VTI) - MSCI EMIF (EEM)
- MSCI EAFE (Europe-Asia-Australia-far-east) (EFA)
- Dow Diamonds Trust (DIA)
- China 25 Xinhua/FTSE Index (FXI)
- Brazil San Paulo Stock Exchange (EWZ)
- MicrosoftMicrosoftMicrosoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
(MSFT) - General ElectricGeneral ElectricGeneral Electric Company , or GE, is an American multinational conglomerate corporation incorporated in Schenectady, New York and headquartered in Fairfield, Connecticut, United States...
(GE) - Altria (MO)
The CBOE calculates and disseminates the CBOE Volatility Index (VIX
VIX
VIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market's expectation of stock market volatility over...
), the CBOE S&P 500 BuyWrite Index (BXM)
CBOE S&P 500 BuyWrite Index (BXM)
The CBOE S&P 500 BuyWrite Index is a benchmark index designed to show the hypothetical performance of a portfolio that engages in a buy-write strategy using S&P 500 index call options.-Description:...
, and other indexes.
See also
- Chicago Board of Trade BuildingChicago Board of Trade BuildingThe Chicago Board of Trade Building is a skyscraper located in :Chicago, Illinois, United States. It stands at 141 W. Jackson Boulevard at the foot of the LaSalle Street canyon, in the Loop community area in Cook County. Built in 1930 and first designated a Chicago Landmark on May 4, 1977, the...
- Commodity Futures Trading CommissionCommodity Futures Trading CommissionThe U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
- Derivatives marketDerivatives marketThe derivatives market is the financial market for derivatives, financial instruments like futures contracts or options, which are derived from other forms of assets....
- List of futures exchanges
- National Stock Exchange, Chicago
- OneChicago
- Volatility IndexVIXVIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Often referred to as the fear index or the fear gauge, it represents one measure of the market's expectation of stock market volatility over...