Definition of OEX Options
OEX (Standard & Poor’s 100 index options) are financial derivatives that give the right, but not the obligation, to buy or sell the S&P 100 Index at a predetermined price before a specified expiration date. Traded on the Chicago Board Options Exchange (CBOE), these options were originally the standard for index options trading but have since been overshadowed in popularity by options tied to the S&P 500 (SPX).
OEX vs SPX Options Comparison
| Feature | OEX Options | SPX Options |
|---|---|---|
| Underlying Asset | S&P 100 Index | S&P 500 Index |
| Popularity | Historically popular but less so now | Currently more popular |
| Type of Index | Large-cap companies | Broader market representation |
| Expiration Cycle | Monthly | Daily, weekly, and monthly available |
| Cash Settlement | Standard cash settlement | Also offers European-style options |
| Diversification | Less diversified (100 stocks) | More diversified (500 stocks) |
Examples and Related Terms
- Call Option: Gives the holder the right to buy the underlying index at a specific price.
- Put Option: Gives the holder the right to sell the underlying index at a specific price.
- Index Option: A financial derivative based on a stock market index, like OEX or SPX.
- Hedging: Taking an offsetting position in an asset to reduce potential losses.
graph LR
A[OEX Options] --> B[Call Option]
A --> C[Put Option]
A --> D[Hedging]
E[S&P 100 Index] --> A
Humorous Citations & Fun Facts
“Investing in options is like dating—sometimes a love affair, sometimes a heartbreak, but always a thrill!” 💖💰
Did you know? The S&P 100 contains the 100 largest U.S. companies, confirming that while small is mighty, big is often richer!
Historically, the OEX launch in 1986 became a landmark in the options trading world, paving the way for more sophisticated financial instruments.
Frequently Asked Questions
What is the underlying asset for OEX options?
OEX options are based on the S&P 100 Index, which consists of 100 major stocks.
Can I exercise OEX options before the expiration date?
Yes, OEX options can be exercised, but are typically handled around their expiration.
Why have SPX options become more popular than OEX options?
SPX options have broader market representation and more flexibility in terms of expiration cycles.
Are OEX options cash-settled?
Yes, OEX options are typically cash-settled upon expiration.
Can OEX options be used for speculation?
Absolutely! Traders often use OEX options to speculate on the performance of large-cap stocks.
Online Resources
Recommended Books
- “Options as a Strategic Investment” by Lawrence G. McMillan
- “The Options Playbook” by Brian Overby
- “Trading Options for Dummies” by Joe Duarte
Test Your Knowledge: OEX Options Quiz
Thank you for diving into the exciting world of OEX options! Always remember, whether you’re hedging or speculating, make sure to trade wisely… and maybe with a splash of fun! 🎉
