Definition
The CBOE, the Chicago Board Options Exchange, opened in 1973 as the first regulated marketplace for trading standardized, listed options on individual stocks. Before it, options traded only over the counter as bespoke, illiquid contracts negotiated between two parties.
By standardizing strike prices, expiration dates, and contract sizes, and by introducing a central clearinghouse, the CBOE turned options into instruments that could be freely bought and sold.
Why it matters
How it works
Standardization is the key innovation. When every contract on a given stock shares the same set of strikes, expirations, and a uniform contract size, contracts become interchangeable and a continuous market can form. A central clearinghouse steps between buyer and seller so neither party depends on the other's solvency. The CBOE also pioneered index options and the VIX, an index that tracks expected market volatility. Today many options trade across several competing exchanges, but the CBOE established the template the entire listed-options industry follows.