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CBOE currently trades cash-settled index options on approximately 40 different indexes. Index options allow investors to make investment decisions on a specific market industry or on the market as a whole. Just as stock options are defined as contracts that give the buyer the right to buy or sell a stock at a stated price for a limited period of time, cash-settled index options give buyers similar rights. However, the underlying asset covered by index options is not shares in a company, but rather, an underlying dollar value equal to the index level multiplied by $100.
There are two types of equity options, calls and puts. A call option gives its holder the right to buy an underlying security, whereas a put option conveys the right to sell an underlying security. Long-term Equity AnticiPation Securities (LEAPS) are long-term option contracts that allow investors to establish positions that can be maintained for a period of up to three years. Equity FLEX options allow users to custom tailor most contract terms and enjoy expanded position limits for exchange listed Equity and Index options. FLEX options offer investment professionals, holders of restricted stock, large stockholders, corporations and other types of investors the newest in risk management instruments, especially designed to extend access to customized derivative products.
CBOE trades Options on Exchange Traded Funds (ETFs). ETFs are shares of trusts that hold portfolios of stocks designed to closely track the price performance and yield of specific indices. HOLDRs are trust-issued receipts that represent an investor's beneficial ownership of a specified group of stocks. HOLDRs allow investors to benefit from the ownership of stocks in a particular industry, sector or group. As ETFs trade like stock, options on these products are operationally similar to options on stock. Options on ETFs are physically settled and have an American-style exercise feature. LEAPS are offered on some of the products.
Interest rate Options are European-style, cash-settled options on the yield of U.S. Treasury securities. Available to meet your needs are options on short, medium, and long-term rates. These options give you an opportunity to invest based upon your views of the direction of interest rates. CBOE lists options based on the yield-to-maturity of the most recently auctioned 13-week U.S. Treasury Bill (IRX), 5-year Treasury Note (FVX), 10-year Treasury Note (TNX) and the 30-year Treasury Bond (TYX).
Long-term Equity AnticiPation Securities (LEAPS) are long-term option contracts that allow investors to establish positions that can be maintained for a period of up to three years. CBOE lists LEAPS on Equity and Index products. Please visit the CBOE Symbol Directory for a listing of all CBOE Equity LEAPS and Index LEAPS. The development and introduction of LEAPS by CBOE in 1990 added a whole new range of options possibilities, many suited for conservative stock investors. Current options investors are using LEAPS, as are stock investors, because of the similarities between LEAPS and shares of stock, and the more conservative nature afforded to LEAPS by their long-term expirations.
CBOE Binary Options are a pure and simple way to trade based on your opinion of where a market is headed over a certain period of time. They are contracts that, at expiration, pay out a pre-determined, fixed amount or nothing at all. The payout amount for CBOE Binary options is $100. Like traditional options, Binary Options are based on an underlying security, have various strike prices to choose from as well as various expirations. CBOE lists both call and put Binary Options. If, at expiration, the price of the underlying security closes at or above the selected strike price, the buyer of a call Binary Option receives $100 per contract. If the underlying security closes at a price that is below the strike price on the expiration date, the buyer receives nothing.
CBOE broke new ground in October 2005, when it introduced "Weeklys", a new type of option. Weeklys are one-week options as opposed to traditional options that have a life of months or years. In general, Weeklys have the same contract specifications as standard options, except for the time to expiration, and offer the same continuous, two-sided quotes as standard options. As of March 24, 2006, CBOE offers four Weeklys classes:
Quarterly options trade based on a calendar quarter - with endings in March, June, September and December, and they expire on the last business day of each respective month. Regular monthly options typically expire on the Saturday following the third Friday of each month. CBOE lists options with Quarterly expirations for a period of one year.
FLexible EXchange® Options (FLEX Options) are customized equity or index option contracts made available by the Chicago Board Options Exchange. FLEX Options provide investors with:
The CBOE Volatility Index (VIX) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world's premier barometer of investor sentiment and market volatility.
Welcome to the special Index Sites section of CBOE.com. CBOE has created specialized "Index Sites" to offer concentrated information on particular products or groups of related CBOE products. Not all Index products traded at CBOE are included here. Information on Indexes or products not listed on this page may be found under the "Products" tab.
For years, sophisticated investors have used listed options as alternatives to OTC-traded credit derivatives such as credit default swaps (CDS). CBOE is now highlighting "DOOM" or "Deep Out-Of-the Money" put options because investors are demanding listed alternatives now more than ever before.
CBOE Research Notes are memos consisting of market-related topics and strategies associated to CBOE investment products.
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