Chicago Board Options Exchange (CBOE)
Also known as: cboe, chicago board options exchange, cboe options exchange
The Chicago Board Options Exchange (CBOE) is the largest U.S. options exchange and the first marketplace created specifically for trading listed options. It standardizes options contracts and provides a central, regulated market where they can be bought and sold.
The Chicago Board Options Exchange opened in 1973 as the first exchange devoted to listed options. Before the CBOE, options were negotiated privately between two parties, which made them illiquid and hard to price. The exchange solved that problem by listing standardized contracts with fixed strike prices, expiration dates, and contract sizes, so any buyer could be matched with any seller.
Standardization is what makes secondary trading possible. Every listed equity option represents 100 shares of the underlying stock, expirations follow a set calendar, and strike prices are set at regular intervals. Because contracts are fungible, an investor who bought a call can close the position by selling an identical call rather than having to exercise it or find the original counterparty. The Options Clearing Corporation (OCC) issues and guarantees the contracts, standing between buyer and seller so neither party carries the other's credit risk.
The CBOE also created the index option market and publishes the VIX, a widely watched measure of expected S&P 500 volatility derived from option prices. Today the exchange lists options on individual stocks, ETFs, and broad market indexes, and operates as part of Cboe Global Markets alongside equities and futures venues.
Options exam content leans on this history. The SIE and Series 7 expect you to know that the CBOE introduced standardized listed options, that the OCC issues and guarantees them, and how the primary issuance and secondary trading of contracts work. The Series 9 goes deeper into CBOE market structure and the rules that govern options trading supervision.
Key takeaways
- The CBOE, founded in 1973, was the first exchange built for trading listed options.
- It standardized strike prices, expirations, and contract size, creating a liquid secondary market for options.
- The Options Clearing Corporation issues and guarantees listed options, removing counterparty credit risk.
- The CBOE launched index options and publishes the VIX volatility index.
- The SIE, Series 7, and Series 9 all test CBOE market structure and options issuance.