OEX

The abbreviation OEX, in finance and investing, refers to the ticker symbol with which the Standard & Poor's 100 Index options are traded. As these financial instruments are often traded and well-known, market participants frequently call the index using the ticker symbol. The market on which these options are bought and sold is the CBOE (stands for the Chicago Board Options Exchange).

OEX history

In the past, OEX options were generally accepted to be an established trading standard used for such derivatives as options on the national market. But eventually, OEX index options lost their position of the standard to the S&P 500 index options, which became more popular.

The CBOE volatility index, traditionally named the VIX, was previously calculated on the basis of OEX options. The VIX is often employed for risk evaluating, options pricing and even traded via various products, so its significance for the markets is clearly noticeable. In 2003, the principles of the VIX calculation were changed, and the S&P 500 options were chosen to be used for that purpose, which caused discontent among many OEX supporters. The previous version is now available for observation under the VXO symbol.

OEX main features

OEX index options represent the performance of most prominent stocks in the American market. The capitalization of the stocks is taken into consideration, as each element is assessed in relation to the value of its shares on the market. So, the market cap of each OEX index element and its change over time influence the total effect it has on the index value. The price of each share of a certain component multiplied by a number of shares of this component on the market is what has the impact on the OEX index.

It’s also important to note that the stocks considered by the OEX index options are always the largest ones on the domestic market, and often come from various business spheres and industries. By being formed of such various components, the OEX index might serve as a good representation of the general corporate performance in the U.S.

As OEX is a ticker symbol for index options, it’s required for a stock to have options obtainable for trading to be included in the list of stocks of the index. At least half of the stock must also be traded on a market and available for the general investors and traders.

Although the OEX index options are less popular nowadays than the S&P 500, it’s still an important indicator of the financial sphere, especially for those traders who work mainly in the blue-chips segment of the market. Their significance is connected to a fact that OEX options provide a possibility to track the performance of the most important stocks in that market segment. It’s important to remember, though, that these options are cash-settled, as the S&P 100 Index isn’t tangible.

Using OEX options

OEX options, as any other options, provide their owner with a possibility to buy or sell the S&P 100 Index at a certain price during a given time period without obliging the owner to do so in case the conditions are unfavorable. So, many possible ways of operating regular options are appliable to OEX options as well. These options are often used for hedging and speculating, and might be used for employing various trading strategies.