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S&P 100® Index Options - OEX, XEO, & OEF

S&P 100 Index Options - OEX   S&P 100 Index Options - XEO   iShares S&P 100 Index Options - OEF

What is the S&P 100?

The S&P 100 Index (ticker symbol OEX) is a capitalization-weighted index, covering a broad range of industries. Each OEX index option contract represents 100 times the current value of the Index. For example, when the Index is at 600, the dollar value the index options will cover will equal $60,000 (or 100--the multiplier--times 600).

Who created the S&P 100 (ticker symbol OEX)?

The OEX was created by the Chicago Board Options Exchange (CBOE) and originally represented the top 100 stocks that traded on the CBOE in 1983. However, Standard & Poor's now manages the S&P 100 and is responsible for the addition and deletion of securities.

Who uses S&P 100 options?

Users of S&P 100 index options fall in two broad categories: institutional asset managers and traders, and individual investors.

Individual investors who use S&P 100 options cover a broad spectrum, from conservative blue-chip investors to more aggressive stock market traders. However, depending upon your particular financial goals and investment objectives, S&P 100 options may or may not be right for you. You should seek professional investment advice; please consult with your broker and/or financial advisor before you invest in S&P 100 options.

Why come to the CBOE to participate in movements of the broad stock market?

S&P 100 option contracts are a proven financial instrument, with an established and active market. S&P 100 options are traded only at the Chicago Board Options Exchange, the world's first and largest options exchange. S&P 100 options are cleared by the Options Clearing Corporation, which has received a triple-A credit rating. More than one billion S&P 100 contracts have been traded since the CBOE launched the trading of OEX, the first cash-settled securities product, on March 11, 1983.

Is the settlement for S&P 100 options American-style or European-style? Prior to 2001, S&P 100 options were American-style only. This means they can be exercised on any business day prior to expiration. However, most other index options are European-style, meaning that they may be exercised only during a specified period of time just prior to its expiration. In 2001 CBOE introduced European-style S&P 100 options (XEO), so that customers will be offered both American- and European-style S&P 100 options. S&P 100 options, available in each of the four nearby months, expire on a monthly basis. The expiration date is the Saturday immediately following the third Friday of the expiration month until February 15, 2015. On and after February 15, 2015, the expiration date will be the third Friday of the expiration month. Settlement value is tied to the S&P 100 at expiration or to the value of the Index when the option is exercised. This value is calculated by Standard and Poor's. OEX options are cash-settled. This means that cash is delivered at settlement, not securities.

What industry groups are the S&P 100 components drawn from?

The S&P 100 companies are drawn from a variety of industry groups, as shown in the pie chart below.

How is the Index calculated?

The index is calculated by the Standard & Poor's Corporation and is capitalization-weighted. This means that it gives greater weight to those stocks with greater market value. The market value is determined by multiplying the number of shares outstanding by the price per share.

The market value of all of the stocks in the index are added together and divided by a "divisor", the result is the current value of the S&P 100 Index. Capitalization weighting allows for the index to accurately reflect the performance of the market's largest and most popular stocks.

Is the OEX similar to the Dow? Do the indexes move together?

No, OEX is not the Dow Jones Industrial Average! Both are popular indexes and do share many stocks, but they differ significantly in composition and weighting and therefore differ in movement. The Dow consists only of 30 large industrial stocks and is a price-weighted index. This means that the prices of the 30 stocks are totalled and then divided by a divisor. The S&P 100, which OEX represents, consists of 100 blue-chip stocks and is capitalization-weighted. This means that the index reflects the performance of 100 of the market's largest and most popular stocks. These differences can cause the two indexes to differ significantly in terms of movement. Over a long-range period of time they have moved in a similar pattern, but on a day-to-day basis they can vary substantially.

The performance of OEX has a high correlation with the S&P 500 Index (SPX), which is the institutional benchmark for the domestic equity market.

The five largest stocks (in terms of weighting) for some of the key CBOE stock index products are shown in the tables below. While the OEX, SPX, and NDX look to stock market capitalization for weighting (and stocks such as GE, Microsoft, and Exxon have surpassed $300 billion in market capitalization), the Dow Jones Industrial Average (DJX) is price-weighted and gives more weight to stocks with higher prices.

How often is the index recalculated during the trading day?

The index is calculated every 15 seconds by the Standard and Poor's Corporation.

How does exercise work regarding OEX options?

Although the value of your OEX options is based on the value of the S&P 100 Index, you will not receive, or have to deliver, stocks if you exercise the options. You will receive cash if the option has value at expiration. This is known as cash-settlement. This is a key difference between index options and equity options. Equity options can be exercised as a means to buy or sell the underlying stock. The process is different with index options because they are cash-settled. When an OEX option is exercised, the holder receives the in-the-money amount in cash.

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options, (ODD). Copies of the ODD are available from your broker, by calling 1-888-OPTIONS, or from The Options Clearing Corporation, One North Wacker Drive, Suite 500, Chicago, Illinois 60606. Please note that in order to simplify this paper, commissions, fees, and taxes are not taken into account. All profit/loss diagrams refer only to approximate results at expiration. 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. OEX® is a registered trademark and SPX™ is a trademark of the Chicago Board Options Exchange, Inc. Dow Jonessm , Dow Jones Internet Commerce Indexsm and Dow Jones Industrial Averagesm are service marks of Dow Jones & Company, Inc. and have been licensed for certain purposes by The Chicago Board Options Exchange, Inc. ("CBOE"). CBOE's options based on the the Dow Jones Internet Commerce Index and the Dow Jones Industrial Average are not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such products. The Nasdaq-100 Index® is a registered mark and NDXsm and NDSsm are service marks of The Nasdaq Stock Market, Inc. These marks are licensed for use by CBOE in connection with the trading of options based on the Nasdaq-100 Index. Such options have not been passed on by The Nasdaq Stock Market, Inc. or its affiliates as to their legality or suitability, and such options are not issued, endorsed, sold or promoted by The Nasdaq Stock Market, Inc. or its affiliates. THE NASDAQ STOCK MARKET, INC. OR ITS AFFILIATES MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO SUCH OPTIONS.

The Goldman Sachs Technology Indexes are the property of Goldman, Sachs & Co. (Goldman Sachs) and have been licensed to the Chicago Board Options Exchange in connection with the trading of options based upon the indexes. Goldman Sachs assumes no liability in connection with the trading of any contract based upon any of the indexes. GSTI is a trademark of Goldman, Sachs & Co. Copyright© Chicago Board Options Exchange 2001.

For any options that are based on reduced values of the Nasdaq-100 Index®, CBOE is solely responsible for calculating and disseminating such reduced values from the corresponding values of the Nasdaq-100 Index, and neither The Nasdaq Stock Market, Inc. nor any of its affiliates (which are collectively referred to as the Corporations) shall have any liability arising out of the calculation or dissemination of such reduced values. Such options have not been passed on by the Corporations as to their legality or suitability, and such options are not issued, endorsed, sold, sponsored or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO SUCH OPTIONS.

For complete information about iShares, request a prospectus by calling 1-800-iSHARES (1-800-474-2737). Read it carefully before investing. Equity investments involve risks, including possible loss of principal.

iShares are distributed by SEI Investments Distribution Co. Barclays Global Fund Advisors serves as an advisor to iShares and is a subsidiary of Barclays Global Investors, N.A., (BGI) neither of which is affiliated with SEI. iShares are not sponsored, endorsed, sold, or promoted by Standard & Poor's. Nor does this company make any representation regarding the advisability of investing in iShares. iShares is a servicemark of Barclays Global Investors, N.A.. All other trademarks, servicemarks or registered trademarks are the property of their respective owners.

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