Chicago Board Options Exchange (CBOE)

by · June 13, 2012

Established in 1973 by the Chicago Board of Trade, the Chicago Board Options Exchange (NASDAQ: CBOE) is the largest options exchange in USA. Located at 400 South LaSalle Street in Chicago, CBOE offers for trade options on more than 2,200 companies, 140 Exchange Traded Funds (ETFs) and 22 stock indices. In 2007, the number of trades was in the range of one billion options contracts.

The Chicago Board Options Exchange started its operation on 26th April 1973 and was the first ever to offer standardized stock options for trade in an exchange. Like other exchanges in USA, the CBOE is regulated by the SEC (Securities and Exchange Commission)

CBOE Operations

Market capitalization of the global derivatives market, futures, options, swaps, according to a Wall Street Journal estimate, was in the range of $450 trillion in April 2007. Market capitalization of US stock exchanges totals approximately 30 trillion, while stock exchanges worldwide total roughly 20 trillion. The global fixed income market totals approximately 65 trillion.

Clearing the options contracts of CBOE is the responsibility of the Options Clearing Corporation (OCC). Trading in volatility and variance contracts was started on the CBOE Futures Exchange in 2004. In 2007, it launched the CBOE Stock Exchange (CBSX), a Reg NMS compliant stock exchange with the intention of providing competition to NASDAQ, NYSE and other exchanges.

The CBOE uses a dual system that allows traders to choose between the electronic system and the traditional open cry system. A vast majority of trades (95%) accounting for 60% of traded volumes are placed and executed electronically. The difference is due to the fact that the trades carried out on the open outcry system are typically large, complex institutional orders. The open outcry system is advantageous in the sense that floor brokers can use their skills to negotiate and get a better price.

CBOE filed the necessary paperwork for its initial public offering on March 11, 2010.

Major Contracts

While the number of options offered by CBOE is exceptionally large, some of the popular options offered include the following:

  • NASDAQ-100 Index (NDX)
  • NASDAQ-100 Trust (QQQQ)
  • Nasdaq Composite (ONEQ)
  • S&P 500 Index (ticker SPX)
  • S&P 100 Index (OEX)
  • S&P 500 Depositary Receipts – SPDRs (SPY)
  • S&P Latin American 40 (ILF)
  • S&P MidCap 400 (MDY, IJH, and CBOE root symbol MID)
  • Dow Jones Industrial Average (DJX)
  • Microsoft (MSFT)
  • General Electric (GE)
  • Altria (MO)
  • Russell 2000 Index (RUT)
  • Cohen & Steers Realty Majors Index (ICF)
  • Wilshire 5000 (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)

Some of the indexes calculated and distributed by CBOE include but not limited to the following:

  • CBOE Volatility Index (VIX)
  • the CBOE S&P 500
  • BuyWrite Index (BXM)

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