Chicago Board Options Exchange

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Chicago Board Options Exchange
Cboe logo.gif
Founded 1973
Headquarters Chicago, Illinois
Key People William Brodsky, chairman
Products Options on equities, equity indexes, ETFs and interest rate products (+futures and stock exchange)

The Chicago Board Options Exchange was founded in 1973 as the first U.S. options exchange trading standardized, listed options. The Options Clearing Corporation was formed two years later, and further standardization was made with the addition of the Black-Scholes pricing model.

CBOE today offers options on 1900+ equities, 28 broad-based indexes and sector-based indexes, 96 ETFs, and options on four interest rate products. CBOE is regulated by the Securities and Exchange Commission (SEC).

As one of six options exchanges in the United States, CBOE is the oldest and largest in total annual trading volume.

  • CBOE trading volume in 2006 totaled a record 675 million contracts, a 44% increase over 2005.
  • Volume on CBOE’s equity options, an area in which CBOE has established a foothold over the years, rose 42% in year-against-year figures.
  • The exchange’s most actively traded product is the S&P 500 Index (SPX), which in 2006 recorded a 104.3 million contract volume record.


Template:Infobox Midpage Need Sponsor Launched in April 1973, the Chicago Board Options Exchange was conceived of by the Chicago Board of Trade (CBOT). At the time of conception, futures volume was flagging, and the CBOT looked for new avenues to supplement revenues. Exchange-traded options was the answer. Shortly after CBOE was launched, grain trading volume took off as grain and oilseed prices rose to record levels on international buying. Were the CBOT to have known about this eventual extended market rally and subsequent transactional profits, some question whether CBOE would have made it onto the CBOT’s drawing board.

According to an article which chronicles the introduction of listed options,[1] the “birthing room” for CBOE was in the former smoking lounge of the CBOE, “a windowless, little room at the southeast corner of the then-120-year old grains exchange.”

Early trading volume averaged around 1,000 calls a day, and puts were not introduced for another four years. A year after launch, CBOE trading volume had grown 40-fold, allowing the exchange to move onto its own trading floor. This was facilitated by double-decking the CBOT trading floor at 141 West Jackson, with CBOE on the top floor and CBOT below.

One of the most noteworthy milestones for CBOE was the launch of stock index options. In March 1983, CBOE introduced its first proprietary index, the CBOE-100 Index, later renamed the S&P 100 Index (OEX). Four months later, options trading on the S&P 500 Index (SPX) was launched.

In 1984, CBOE moved into its current ten-story building. Annual volume in that year exceeded 100 million contracts for the first time. Also during the year, CBOE launched its Retail Automatic Execution System (RAES) to facilitate electronic order execution.

The Options Institute, the educational arm for CBOE, debuted in 1985, to educate investors about options. Over the years, Options Institute has added comprehensive live and online curricula, taught by trading industry professionals. In 1992, the Options Industry Council was formed as an industry body devoted to the expansion of investor education, representing all U.S. options exchanges. Nonetheless, CBOE’s Options Institute continues as a strong source of options education.

Options on interest rate products were added at CBOE in 1989, and the next few years saw creation of more new products and indexing tools, such as Long-term Equity AnticiPation Securities (LEAPS) (1990), FLEX options and the VIX volatility index (both in 1993), the Dow Jones Industrial Average index (DJX) in 1997, and the VXN Volatility Index (VXN) in 2001. In 2002 the CBOE S&P 500 BuyWrite Index (BXMSM) was introduced as the first major benchmark for options performance in a study by a Duke University professor.

In 1998, its 25-year anniversary, CBOE annual volume surpassed 200 million contracts for the first time. Subsequent years brought more changes in trading technology, such as the Designated Primary Market Maker system, the Rapid Opening System, and CBOEdirect.

In 2003, in response to expanding technology needs of users, CBOE introduced its CBOE Hybrid Trading System to provide customers a blended solution of both screen-based and open outcry trading models. Also during 2003, CBOE and the other options exchanges successfully completed their Option Intermarket Linkage Plan, the culmination of CBOE’s 2000 proposal to the SEC to adopt a plan to link U.S. options markets.

Shifting the emphasis of CBOE’s corporate business model from a membership association to a for-profit model has driven the Exchange to seek new business opportunities. CBOE offers futures through the CBOE Futures Exchange, which opened for trading in 2004 focussing on volatility and variance contracts, and in 2006 the CBOE Stock Exchange (CBSX) was launched. Both the futures and stock exchange are fully electronic.

Also in 2006, CBOE forged an alliance with HedgeStreet, Inc., an all-electronic futures exchange, for the joint development of new products, sharing of technology services, and marketing and support for HedgeStreet’s binary options and futures products.

In January 2007, CBOE filed an S-4 plan for demutualization with the Securities and Exchange Commission. When the demutualization is complete, one plan considered is to go public. One issue facing demutualization remains, however, and that is the issue of CBOT members’ exercise right privileges. The issue is still pending with the SEC, which CBOT outside counsel contends does not have the responsibility or expertise to decide the matter. The Delaware court, where the issue now resides, has not issued a decision.


> Options on 1900+ equities > 28 broad-based indexes and sector-based indexes and 96 ETFs


  • Options on S&P 500® Index (SPX®)
  • Options on Dow Jones Industrial Average (DJX)
  • Options on NASDAQ-100® Index (NDX)
  • Options on Mini-SPX Index (XSP)


  • Options on Russell 1000® Index (RUI)
  • Options on Russell 2000® Index (RUT)


  • Options on iShares® Russell 2000® Index Fund (IWM)
  • Options on iShares Russell Microcap

> Options on four interest rate products

> Created CBOE Futures Exchange

> Created CBOE Stock Exchange


  • On Oct. 31, 2007, CBOE reported that a CBOE seat had traded at an all-time high of $2.9 million, surpassing the previous record $2.75mm set on October 24, 2007. As of Oct. 31, a total of 81 seats had changed hands on the exchange in 2007. The record price of $2.9mm is an increase of 66% from the $1.75mm price paid at the close of 2006.[1]
  • On Oct. 18, 2007, CBOE released its third-quarter financials. Revenues for the period totaled nearly $97 million, a 53-percent over 2006, on record trading volume Of 260 million contracts.[2]
  • On September 27, CBOE began trading options on the CBOE Nasdaq-100 Volatility Index (VXN) and the CBOE Russell 2000 Volatility Index (RVX). These two new contracts expand the suite of volatility products offered exclusively at CBOE and the CBOE Futures Exchange (CFE). CBOE will now offer options on three of CBOE's volatility benchmarks, as VXN and RVX options will join the CBOE Volatility Index (VIX) options.
  • On August 28, CBOE began trading Basket Credit Event Binary Options (Basket CEBOs). Two of these are based on specific industry sectors (automobile and homebuilder) and the third as a high-yield composite basket. Basket CEBOs are call options based on a basket of reference entities (the basket components). The options automatically pay out a cash amount each time a credit event is confirmed in any of the basket components during the life of the contract.


  1. SFO Magazine, April 2003.

Chicago Board Options Exchange

Chicago Board of Trade

SFO Magazine, "Three Decades of Options," Gail Osten (April 2003), "In the Catbird Seat." Isabelle Clary, (July 23, 2007) [[3]]