OEX (S&P 100 Index): Overview
The OEX is the ticker symbol used on the Chicago Board Options Exchange (CBOE) to identify options on the Standard & Poor’s 100 Index—an index that tracks 100 of the largest U.S. publicly traded companies. It serves as a benchmark for large-cap, blue‑chip stocks and a tradable vehicle for investors and portfolio managers.
What the Index Measures
- The S&P 100 is a subset of the S&P 500, composed of the 100 largest U.S. companies by market capitalization.
- It is capitalization-weighted: each component’s influence on the index is proportional to its market value (share price × shares outstanding). Larger companies therefore have a bigger impact on index moves.
- Components are drawn from a broad range of industries and must meet inclusion criteria such as sufficient public float and the availability of listed options.
OEX Options — How They Work
- OEX options give the holder the right (but not the obligation) to gain economic exposure to moves in the S&P 100 Index. Because an index cannot be delivered physically, these options settle in cash.
- Traders use OEX options to hedge portfolios, gain directional exposure to large-cap stocks, or implement multi-leg options strategies.
- Common strategies include vertical spreads and strangles, which are used to express directional views or volatility expectations while managing risk and cost.
Uses and Practical Example
- Hedging: A manager with a portfolio concentrated in large-cap, blue-chip stocks might buy OEX put options as short-term insurance against a market decline. Even if the manager’s holdings don’t match the exact composition of the S&P 100, a strong correlation can make OEX puts an effective hedge.
- Speculation and income strategies: Traders use calls, puts, spreads, and combination strategies on OEX to speculate on market direction or to generate premium income.
Historical and Market Context
- OEX options were the original benchmark for index options trading in the U.S., but options on the broader S&P 500 (SPX) have since become more popular.
- The CBOE’s VIX volatility index originally used OEX options but switched to SPX options in 2003. For those tracking the older measure, the symbol VXO reflects the prior methodology.
Key Takeaways
- OEX identifies options on the S&P 100, a capitalization-weighted index of 100 large U.S. companies.
- OEX options settle in cash and are used for hedging, speculation, and multi-leg options strategies.
- While less prominent than SPX, OEX remains a useful benchmark and hedging tool for large-cap exposure.