CBOE Index Workbench

INTRODUCTION TO STOCK INDEXES

Stock index data and charts have been available for more than a century.

Charles H. Dow first unveiled his industrial stock average on May 26, 1896. In 1923 Standard & Poor's introduced a series of indexes that included 233 companies that were grouped into 26 industries. In response to the interests of investors who desired to manage stock portfolio risk with one instrument, in 1983 the Chicago Board Options Exchange introduced the options on a basket of 100 stocks - a popular product that came to be known as S&P 100 (OEX) options.

The popularity of stock indexes has grown in recent decades, as the amount of assets indexed to the S&P 500 index grew to more than $900 billion by 2000.

Today one of the most common financial questions posed in conversations is "How did the market do?" where the phrase "the market" refers to stock indexes such as the Dow Industrials, S&P 500, and/or Nasdaq indexes.

Some investors do technical analysis of stock index charts and graphs to try to detect patterns or trends in performance (and, of course, one should note that past performance is not a guarantee of future results).

Options involve risk and are not suitable for all investors. Prior to buying or selling options, a person must receive a copy of Characteristics and Risks of Standardized Options, which is available from The Options Clearing Corporation, One North Wacker Dr., Suite 500, Chicago, IL 60606, or by calling 1-888-OPTIONS.

Please note that futures on the CBOE Volatility Index® (VIX®) were introduced in 2004 after the methodology for VIX was changed; please visit www.cboe.com/vix for volatility updates that might not be reflected on this CD-ROM.

This discussion is designed to assist individuals in learning how options work and in understanding various options strategies. This discussion is for educational purposes only and is not intended to provide investment advice. Commissions, taxes and transaction costs generally are not included in the strategy discussions, but can affect final outcome and should be considered. Please contact a tax advisor for the tax implications involved in these strategies.
This discussion has been prepared solely for informational purposes, based upon information generally available to the public from sources believed to be reliable, but no representation or warranty is given with respect to its accuracy or completeness. No statement herein should be construed as a recommendation to buy or sell a security or to provide investment advice. Any profit/loss diagrams refer only to approximate results at expiration. Past performance is no guarantee of future results.

S&P 100® and S&P 500® are registered trademarks of the McGraw-Hill Companies, Inc., and are licensed for use by the Chicago Board Options Exchange, Inc. ("CBOE"). The Russell 2000® Index is a registered trademark of Frank Russell Company. The Nasdaq 100® is a registered mark of The Nasdaq Stock Market, Inc. "Dow Jones SM", "Dow Jones Industrial AverageSM", "Dow Jones Transportation AverageSM," and "Dow Jones Utility AverageSM" are service marks of Dow Jones & Company, Inc. and have been licensed for certain purposes by the CBOE. iSharesSM is a servicemark of Barclays Global Investors. The Goldman Sachs Technology Indexes are the property of Goldman, Sachs & Co. and have been licensed to the CBOE in connection with the trading of options based upon the indexes. Dow Jones & Co., The Nasdaq Stock Market, Goldman Sachs, and McGraw-Hill make no warranties and bear no liability in regard to the trading of index options.VIX®, CBOE Volatility Index® LEAPS®, FLEX®, FLexible EXchange® and OEX® are registered trademarks and Long-term Equity AnticiPation SecuritiesTM and SPXTM are trademarks of the Chicago Board Options Exchange, Inc.

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