Chicago Board Options Exchange - Explained
What is the Chicago Board Options Exchange?
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Table of ContentsWhat is the Chicago Board Options Exchange (CBOE)?How Does the Chicago Board Options Exchange Work?Academic Research on Chicago Board Options Exchange
What is the Chicago Board Options Exchange (CBOE)?
The Chicago Board Options Exchange (CBOE) is a premier exchange holding firm and the largest options exchange in the world. It operates globally and provides services pertaining to equities, indices and interest rates. The CBOE came into being as Chicago Securities in 1973 and continued operating in private ownership until 2010, when it transitioned into a publicly traded firm as Cboe Global Markets, Inc.
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How Does the Chicago Board Options Exchange Work?
CBOE is based in Chicago, IL and serves various geographical locations, offering trading services in a wide range of assets, such as:
- Exchange Traded Products (ETPs)
- Foreign exchange
- Multi-asset funds
CBOE is the largest exchange by volume in Europe, as well as the market leader in options and the second largest exchange operator in the United States. It also leads markets globally in ETP trading. In the United States alone, CBOE boasted annual trading volumes exceeding one billion contracts by the end of 2014. The exchange deals in 22 stock market indices and 140 ETFs and offers options from over 2000 registered firms. Cboe Global Markets has pioneered several ingenious financial solutions, one of the most popular of them being the Volatility Index (VIX). The exchange is also credited with creating the Cboe Clearing Corp., subsequently known as the Options Clearing Corporation (OCC), which evolved as the de facto clearing house to facilitate the exchange of options transactions. Cboe Global Markets is also responsible for setting up The Options Institute in 1985 - an educational establishment that aimed to educate investors about options on a global scale. Presently, The Options Institute conducts seminars and webinars, and offers online courses to investors around the world interested in options trade. Cboe Global Markets has a wide range of products on offer for investors to employ as hedging instruments. Products include
- Put and call options
- Exchange-traded Funds (ETFs)
- Exchange-traded Notes (ETNs)
Cboe also offers options on stock and sector indexes such as S&P 100, S&P 500, and selected indices from Dow Jones, FTSE, NASDAQ and MSCI. It also offers options in Microsoft, General Electric, Altria and Bitcoin. The Volatility Index (VIX) is the core product of Cboe Global Markets and is popular as an accurate index of stock market volatility. It focuses on real-time prices of "Close to the money" options listed on the S&P 500. Its most distinctive feature is a forecast of expected stock market volatility over a period of 30 days in the future. VIX is also an accurate indicator of investor perception of bearish trends in the market - a spike in VIX levels usually denotes perceived instability in the market. CBOEs Volatility Index provides volatility indicators for broad-based indices such as the Dow Jones Industrial Average, Exchange-traded Funds, stocks, commodities, and other niche indices. The exchange is regulated by the Securities and Exchange Commission.