What Is the Chicago Board Options Exchange (CBOE)?

Founded in 1973 as the Chicago Board Options Exchange, it is the world's largest options market with contracts focusing on individual equities, indexes, and interest rates. In 2010, the company converted to a publicly traded corporation and rebranded as Cboe Global Markets, Inc. (Cboe). Traders refer to the exchange as the CBOE ("see-bo"). Cboe is now the holding company and the exchange is a primary asset. Cboe is also the originator of the Volatility Index (VIX) which is the most widely used and recognized proxy for market volatility.

Key Takeaways

  • Cboe used to be referred to as "the CBOE" and was simply an options exchange.
  • In 2010 the company incorporated and rebranded as Cboe Global Markets, Inc.
  • Cboe is now a holding company with the exchange as one of its assets.
  • Cboe is home to the VIX index and many other volatility instruments.

Understanding the Chicago Board Options Exchange (CBOE)

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.