Chicago Board Options Exchange (CBOE)

The Chicago Board Options Exchange, or CBOE for short, is one of the largest and oldest options exchanges in the world. First established in 1973, the CBOE mediates almost half a billion options contracts each year, involving over 50 stock indexes and 1200+ companies. The CBOE is one of the major national exchanges that call Chicago home, along with the Chicago Stock Exchange (CHX)and the CME Group, incorporating the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT).

The Chicago Board Options Exchange also calculates and disseminates the VIX, an acronym for the Chicago Board Options Exchange Volatility Index. As its name implies, the VIX is an index of option contracts for the S&P 500 index. The VIX is an estimation of how volatile the S&P 500 and the market as a whole is expected to be over the ensuing 30 days. The VIX has been referred to as the “Fear Index”, since stock, bond and options traders fear volatility more than anything else.

The Chicago Board Options Exchange is one of the few major exchanges that still uses the open outcry method of trading, although the use of electronic trading platforms such as CME Globex® used at the Chicago Mercantile Exchange is increasing. Most people’s image of trading at the CBOE (as well as the CBOT) comes from movies and television shows that display the frenetic activity that takes place in the trading “pits”. In addition to using their voices, options traders use a complex system of hand signals known as arb or arbing to communicate.

The CBOE has set up an informative online presence that provides new and experienced options traders with a wealth of information on the options contracts traded at the exchange. Moreover, real-time quotes are displayed and an extensive Learning Center has been set up to educate and enlighten traders who seek to increase their knowledge of options trading. The CBOE, like any other US securities exchange, looks to the Securities and Exchange Commission (SEC) for its regulatory guidance. All options contracts entered into at the CBOE are cleared by the Options Clearing Corporation (OCC), the world’s leading options clearinghouse.

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