A subsidiary of the Chicago Board of Trade that operates as an independent entity, the CBOE trades options on over 1,500 equities and equity index futures. It was founded in 1973 to provide standardized, listed stock options as an alternative to options that were unregulated and created on an individual basis. Now the CBOE accounts for over half of all U.S. options trading and 91 percent of index options trading. Trading began April 26, 1973, with 16 call options that were traded on 16 underlying stocks. Put options were added in 1977. The first option on stock indices was introduced on March 11, 1983, when options on the Standard & Poor’s 100 Index (ticker symbol OEX) were introduced. The CBOE also trades options on the Standard & Poor’s 500 Index (SPX).
Options on interest rates were introduced in June 1989: options based on the 13-week U.S. Treasury bill yield and options on the 5-year, 10-year, and 30-year yields to maturity of U.S. Treasury notes and bonds. The underlying value of these options moves up or down as a result of shifts in the U.S. Treasury yield curve.
In 1993, the CBOE created FLEX (flexible exchange) options on the S&P 100, S&P 500, and Russell 2000 indices. FLEX options allow institutional investors to customize the terms of an option contract, the expiration date (up to 5 years), the strike price, and the exercise style and settlement basis, with a minimum opening underlying contract value of $10 million. In 1997, options on the Dow became eligible for FLEX trading.
Trading on sector indices began on the CBOE in October 1992. Options on sector indices in the automotive (AUX), banking (BIX), chemical (CEX), software (CWX), environmental (EVX), gaming (GAX), gold (GOX), healthcare (HCX), internet (INX), insurance (IUX), oil (OIX), retail (RLX), and transportation (TRX) industries are now listed. In 1994, the CBOE Mexico Index (MEX), the Nikkei 300 Stock Index (NIK), and the CBOE Israel Index (ISX) were launched to give U.S. investors the ability to hedge the risks associated with holding stocks in foreign markets. In 1995, new CBOE sector indices in REITs (RIX) and technology (TXX) were added.