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Introduction to ETFs |
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Assets for Exchange-traded Funds (ETFs) have grown significantly since their introduction in 1993. To help investors meet their portfolio management goals, the CBOE® offers ETFs and options on ETFs. |
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Nasdaq-100 Index Tracking Stock (QQQ) |
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The introduction of the Nasdaq-100 Index Tracking Stock (QQQ) allows investors to purchase a share of stock in order to invest in the largest and most actively traded companies on The Nasdaq Stock Market-the companies of the Nasdaq-100 Index. Nasdaq-100 Index Tracking Stock trades under the ticker symbol "QQQ." QQQ average daily volume was an impressive 73.5 million shares in March - May 2001. With Nasdaq-100 Index Tracking Stock, you can buy or sell shares in the collective performance of the Nasdaq-100 Index in a single transaction - just as you buy or sell shares of individual stocks. It's a one-investment portfolio that gives you ownership in the 100 stocks of the Nasdaq-100 Index. And because Nasdaq-100 Index Tracking Stock trades like stock, you can buy them on margin, sell short or hold your shares for the long term. When you purchase Nasdaq-100 Index Tracking Stock, you're investing in the Nasdaq-100 Trust, a unit investment trust that holds shares of the companies in the Nasdaq-100 Index. The Trust is designed to closely track the price and yield performance of the Index - so you can expect your Nasdaq-100 Index Tracking Stock to move up or down in value when the Index moves up or down. The initial market value of QQQ generally approximates 1/40 the value of the underlying Nasdaq-100 (NDX) Index. So for example, if the NDX price level is 1400, the QQQs generally would be expected to be priced around $35. QQQs may be bought and sold at intraday prices throughout the trading day - something you can't do with conventional index mutual funds that are generally purchased or redeemed only at an end-of-day closing price related to net asset value. The pricing of Nasdaq-100 Index Tracking Stock is continuous, subject to any trading halts, during exchange trading hours. The portfolio of Nasdaq-100 Index stocks held by the Nasdaq-100 Trust is passively (not actively) managed, which means the Trust does not try to outperform the Nasdaq-100 Index, just track it closely. And because this tracking requires less costly trading and less portfolio turnover than actively managed portfolios, costs on Nasdaq-100 Index Tracking Stock should be lower than on conventional funds that are actively managed. Because the Nasdaq-100 Trust portfolio is designed to closely track
the Nasdaq-100 Index, it is less likely than actively managed portfolios
to experience the trading of securities, which can create potentially
high capital gains distributions. The Nasdaq-100 Trust will generally
only sell securities to reflect changes in the composition of the
Index and to pay Trust expenses. In addition, since Nasdaq-100 Index
Tracking Stock is sold through exchange trading, they also will
generally not require the sale of stocks and generation of capital
gains that is required by An investment in QQQs should be made with an understanding that the Nasdaq-100 Trust will not be able to replicate exactly the performance of the Index because the total return generated by the securities held in the Trust will be reduced by transaction costs incurred in adjusting the actual balance of the securities and other Trust expenses, whereas such transaction costs and expenses are not included in the calculation of the Index. It is also possible that for short periods of time, the Trust may not fully replicate the performance of the Index due to the temporary unavailability of certain Index securities in the secondary market or due to other extraordinary circumstances. Such events are unlikely to continue for an extended period of time because the trustee of the Trust is required to correct such imbalances by means of adjusting the composition of the Trust. Before investing in QQQs, you should read the Nasdaq-100 (QQQ) Prospectus. For more on QQQ options strategies, click on one of the two examples
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iSharesSM S&P 100 (OEF) |
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Trading in iShares S&P 100 (OEF) began at the CBOE on October 27, 2000, and trading in options on iShares S&P 100 began at the CBOE on February 7, 2001. OEF is an exchange-traded fund that trades exclusively at CBOE. It seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P 100 Index. At the launch of the OEF options, CBOE Chairman and CEO William J. Brodsky said: "OEF options offer investors a cost-efficient way to participate in the performance of the top 100 companies in the United States. The deep, liquid markets found at the world's largest options exchange make CBOE the ideal marketplace for this exciting new product." OEF options trade like stock options, are American-style exercise, are settled by physical delivery, and trade in decimals. The options trade in the OEX trading pit from 8:30 a.m. to 3:15 p.m. CST. For more on iSharesSM S&P 100 (OEF) please: For an example of an OEF strategy, please click on:
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Investor Testimonial |
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What a portfolio manager says -  "Our
firm has been managing reduced-risk accounts hedged with S&P 100
index options for more than 15 years. The introduction of the iShares
S&P 100 provides us with added flexibility and risk management
opportunities. It's an advantage for us that, throughout the day,
we can buy and sell iShares -- passive basket investments that can
lower our basis risk and transaction costs." Walter Sall Chairman of Gateway Investment Advisers manages $2.3 billion in assets. For more information on the QQQ options, please visit http://www.cboe.com/qqq |
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Page 
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.
Click here for more
information on disclaimers,
licenses, trademarks, and other information.
Copyright © Chicago Board Options Exchange, Inc. 2005. All rights
reserved.