Index Options
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.
Equity Options
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.
Interest Rate Options
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).
Binaries
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.
Weeklys
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:
- SPX Weeklys: One-week, European-style options on the S&P 500 index with Friday A.M. settlement (last day of trading is a Thursday).
- XSP (Mini-SPX) Weeklys: A smaller sized (1/10th) version of SPX Weeklys traded on the CBOE Hybrid Trading System.
- OEX Weeklys: One-week, American-style options on the S&P 100 index with Friday P.M. settlement (last day of trading is a Friday).
- XEO Weeklys: A European-style version of OEX Weeklys.