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The OEX is the ticker symbol for both the Standard and Poor's 100 Index and the index options based on it, traded exclusively on the Chicago Board Options Exchange. The index tracks 101 of the largest and most established U.S. companies, and the options on it were the first cash-settled index options ever created anywhere in the world, launched on March 11, 1983. More than one billion OEX options contracts have traded since that debut, and the product's name became so associated with the index that traders routinely call the S&P 100 Index itself simply "the OEX."
The S&P 100 is a subset of the S&P 500, containing 100 of its largest and most established companies, selected for sector balance. As of December 2024, the index contains 101 stocks because Alphabet has two separate share classes both included. The index is capitalization-weighted, meaning companies with larger market values have proportionally greater influence on the index level.
The S&P 100 represents approximately 71% of the market capitalization of the entire S&P 500 and roughly 61% of the total U.S. equity market. You are effectively getting a picture of the economy's megacap backbone from a single index number.
The original OEX options carry American-style exercise. You can exercise them on any business day before expiration, not just on the expiration date itself. This flexibility is the defining feature of American-style contracts and is what makes OEX options distinct from their European-style counterpart, the XEO.
American-style exercise creates a risk for writers of OEX options called early assignment risk. If you sell an OEX call, the buyer can exercise it at any point while the option is in the money. Writers must manage this exposure, which is why institutional traders who want to avoid early assignment prefer the XEO.
The Chicago Board Options Exchange launched XEO options on the same S&P 100 Index in July 2001 to address demand for a version that could only be exercised at expiration. XEO buyers have no right to exercise early. This eliminates early assignment risk entirely for option writers and makes the XEO more straightforward to price and hedge.
Both OEX and XEO settle in cash. You receive the difference between the option's strike price and the index's closing level, multiplied by $100. No shares change hands.
Both OEX and XEO options qualify as Section 1256 contracts under the U.S. tax code. Gains and losses receive 60/40 tax treatment: 60% of the gain or loss is classified as long-term capital gain or loss and 40% is classified as short-term, regardless of how long you held the position. This treatment applies even if you held the option for only one day.
The 60/40 split means the effective tax rate on OEX option profits is lower than the rate you would pay on equity options held short-term, which are taxed entirely as short-term capital gains at ordinary income rates.
Each OEX contract multiplies the index level by $100, making a single contract worth $100 times the current S&P 100 level. There are no position or exercise limits in effect for OEX contracts, though any account holding more than 100,000 contracts must report that position to the Chicago Board Options Exchange.
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