CBOE

The Chicago Board Options Exchange (CBOE, now officially Cboe Global Markets) is the largest options exchange in the United States and the birthplace of listed options trading. Founded in 1973, it introduced standardized, exchange-traded options contracts — replacing the fragmented over-the-counter market. CBOE is also the home of the VIX (Volatility Index), SPX options, and numerous other benchmark products that form the foundation of modern volatility trading.

Why It Matters

The CBOE is where many of the most important options products trade. SPX options (the most actively traded index option), VIX options and futures, and options on major ETFs all have their primary listing on CBOE exchanges. The products CBOE creates and the rules it establishes influence the entire options industry.

For retail traders, understanding CBOE's role helps you appreciate why options are standardized, how new products are introduced, and where the benchmark products (SPX, VIX) that drive market sentiment and strategy construction come from. Many of the concepts you use daily — IV, the VIX, weeklys — originated at or were popularized by the CBOE.

How It Works

CBOE's key contributions to options trading:

• Standardized options (1973): Before the CBOE, options were traded over the counter with custom terms. The CBOE standardized strike prices, expirations, and contract sizes, creating the liquid, transparent market we have today.
• The VIX (1993): CBOE created the Volatility Index, which measures the implied volatility of S&P 500 options. The VIX became the market's primary fear gauge and spawned an entire ecosystem of volatility products.
• SPX options: Cash-settled options on the S&P 500 index with favorable tax treatment (60/40 rule). SPX options are one of the most actively traded options products in the world.
• Weekly options (2005): CBOE introduced options with weekly expirations, giving traders more precise time exposure. Weeklys now account for a large share of total options volume.
• 0DTE options: Zero-days-to-expiration options on SPX, which have exploded in popularity, trade primarily on CBOE exchanges.

CBOE exchange family: Cboe Global Markets now operates multiple exchanges:

• Cboe Options Exchange (C1) — the flagship options exchange
• Cboe BZX Options — an electronic options exchange
• Cboe EDGX Options — another electronic options exchange
• Cboe C2 Options — a secondary options exchange
• Cboe Futures Exchange (CFE) — trades VIX futures and other volatility products

How CBOE generates revenue:

• Transaction fees on options and futures trades
• Market data fees for real-time quote and trade information
• Listing fees from companies and ETFs that list options
• Technology and access fees for exchange connectivity

CBOE and market structure: While the CBOE is the largest, options trade on 16+ exchanges in the US (including NASDAQ PHLX, NYSE Arca Options, MIAX, and others). This fragmentation means your order may be filled on any exchange, not necessarily the CBOE, depending on where the best price is. The CBOE's influence extends beyond its own exchange through the products it creates and the standards it sets.

Quick Example

You want to trade SPX options for their tax advantages. SPX options are a CBOE product — they are exclusively listed on CBOE exchanges. You sell an SPX $4,500 put for $12.00, collecting $1,200. Because SPX options are cash-settled and index-based, they qualify for 60/40 tax treatment: 60% of your profit is taxed as long-term capital gains and 40% as short-term, regardless of how long you held the position.

This tax advantage exists because SPX options are classified as Section 1256 contracts, a status that traces back to their design as CBOE products. On a $1,200 profit in the 37% tax bracket, you save roughly $120 compared to the same profit on SPY options (which are taxed entirely at the short-term rate).