FLexible EXchange Options, or FLEX Options, were introduced by CBOE in 1993. They were designed to give institutional investors greater access to customized derivatives. FLEX options provide customization features similar to over-the-counter (OTC) options but with the convenience and guarantee of exchange-traded options.
Similar to OTC options, FLEX options allow contractual terms such as expiration date, exercise price, style and contract size to be individually specified.
Unlike OTC options, FLEX options are traded through the exchange, with the Options Clearing Corporation (OCC) being the issuer and guarantor of all FLEX option contracts. As the OCC is the largest derivatives clearing organization in the world as well as the first to be awarded a "AAA" credit rating from Standard & Poor, the trading of FLEX options is considered to be virtually free of counterparty risk.
Index FLEX Options
The first types of FLEX options to be introduced were FLEX option contracts on stock market indices and hence they are often simply referred to as FLEX options. Index FLEX options are available on all CBOE listed indices, including the following major indices:
- Dow Jones Industrial Averages
- S&P 500
- S&P 100
- Nasdaq 100
- Russell 2000
Equity FLEX Options
Following the success of Index FLEX options, CBOE launched FLEX options on individual equities in 1995 and they were known as E-FLEX options. E-FLEX options are available on a wide range of actively traded underlying stocks and they include most option classes that are listed at CBOE.