Legal Definitions - Chicago Board Options Exchange

The Chicago Board Options Exchange (CBOE) is the main place in the United States where people trade options. It is an organized marketplace where buyers and sellers come together to buy and sell options.

Options are financial contracts that give the buyer the right, but not the obligation, to buy or sell an underlying asset at a specific price and time. For example, if you buy a call option on a stock, you have the right to buy that stock at a certain price (called the strike price) before a certain date (called the expiration date).

The CBOE provides a platform for traders to buy and sell options on a variety of underlying assets, including stocks, indexes, and exchange-traded funds (ETFs). Traders can use options to speculate on the direction of the market, hedge their existing positions, or generate income.

For example, let's say you own 100 shares of XYZ stock and you're worried that the stock might go down in the next few months. You could buy a put option on XYZ stock, which would give you the right to sell your shares at a certain price if the stock falls below that price. This would protect you from losses if the stock does indeed go down.