TRADING OPTIONS & DERIVATIVES TRADING
Cboe Options Exchange
By GORDON SCOTT Updated May 02, 2019
What Is the Cboe Options Exchange?
Founded in 1973, the Cboe Options Exchange is the world's largest options exchange with contracts focusing on individual equities, indexes, and interest rates. 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.1 Traders refer to the exchange as the Cboe ("see-bo"). Cboe is also the originator of the Cboe Volatility Index (VIX) which is the most widely used and recognized proxy for market volatility.
KEY TAKEAWAYS
Understanding the Cboe Options Exchange
Cboe offers trading across multiple asset classes and geographies, including options, futures, U.S. and European equities, exchange-traded products (ETPs), global foreign exchange (FX), and multi-asset volatility products. It is the largest options exchange in the U.S. and the largest stock exchange in Europe, by value traded. It is the second-largest stock exchange operator in the U.S. and a top global market for ETP trading.
The exchange has a rich history, including the creation of the Cboe Clearing Corp., which later became the Options Clearing Corporation (OCC), the industry clearinghouse for all U.S. options trades.
The business of the Cboe goes beyond simple trade executions, and in 1985 it formed The Options Institute, its educational arm, developed to educate investors around the world about options. In addition, the company offers seminars, webinars, and online courses, including learning 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 on exchange-traded funds (ETFs) and exchange-traded notes (ETNs). Investors typically use these products for hedging and income production through the selling of covered calls or cash-secured puts.
There are options available on stock and sector indexes, including the Standard & Poor's 500, S&P 100, Dow Jones Industrial Average, Russell indexes, selected FTSE indexes, Nasdaq Indexes, MSCI indexes, and sector indexes including the 10 sectors contained within the S&P 500.
The exchange offers social media indexes and specialty indexes covering several options strategies, such as "put write," butterfly, and collar.
Finally, the VIX index, which is the premier barometer of equity market volatility. This Index is based on real-time prices of near-the-money options on the S&P 500 Index (SPX) and is designed to reflect investors' consensus view of future (30-day) expected stock market volatility. Traders call the VIX Index the "fear gauge" because it tends to spike to very high levels when investors believe the market is very bearish or unstable.
The VIX Index is also the flagship index of the Cboe Global Markets' volatility franchise. This includes volatility indexes on broad-based stock indexes, ETFs, individual stocks, commodities, and other specialty indexes.
ARTICLE SOURCES
Related Terms
EDGX Definition
EDGX Exchange is a U.S. equities exchange operated by CBOE U.S. Equities. more
Cboe Volatility Index (VIX)
The Cboe Volatility Index, or VIX, is an index created by Cboe Global Markets, which shows the market's expectation of 30-day volatility. more
What Is a VIX Option?
A VIX option is a derivative security based on the CBOE Volatility Index as its underlying asset. more
Options Clearing Corporation (OCC)
The Options Clearing Corporation (OCC) works with regulators and acts as the issuer and guarantor for options and futures contracts. more
Better Alternative Trading System (BATS)
The Better Alternative Trading System (BATS) is a U.S.-based stock exchange offering investors equities, options, and foreign exchange trading services. more
What Is NYSE Arca?
NYSE Arca is an electronic securities exchange in the U.S. on which exchange-traded products and equities trade. more
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