What it is:
How it works (Example):
The Standard & Poor's 100(S&P 100) is a subset of the famous S&P 500 . It is composed of the 100 largest cap companies in the S&P 500 and spans several industry groups. Introduced in 1976 with a base value of 50, the S&P 100 is a measure of performance for the large-cap sector.
Although the S&P 100 is not as popular as the S&P 500, it is an important, market-weighted fund managers who invest in this large, blue-chip segment. The stocks are chosen based on market capitalization, liquidity and industry representation. To be included in the index, individual stock options must be available for the stock, and the stock must have at least a 50% public float, among other things.for many
Introduced in 1981, call or put options on a financial comprising many stocks. They are essentially bets on the overall movement of the or a basket of stocks. options usually have a contract multiplier of $100, meaning that the price of an equals the quoted premium times $100. Unlike options in of stock or even commodities, it's not possible to physically deliver the underlying to the purchaser of an . Thus, options settle via cash payments.options are
Why it Matters:
Hedgers and speculators can use OEX options to get exposure to an entire gains. Though it is impossible to forecast exactly how a portfolio will perform during a steep sell-off, one can get fairly close to the actual result by determining which particular (OEX, perhaps) to use as a for the portfolio and then determining the correct number of options to use as a portfolio hedge. Like other options, OEX offers and predetermined risk. After all, the most the trader can lose is the premium he or she paid to hold the options, and the up side can be incredible.or entire sector in a single, quick transaction as well as protect against downturns and lock in
It is important to note that equity options have special tax consequences: 60% of any gain on the sale of the is taxed as a long-term capital gain; the other 40% is taxed as short-term capital gain income.