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February 2011

Credit event

CBOE to relaunch Credit Event Binary Options (CEBO) contracts on March 8

CHICAGO, February 22, 2011 / PRNewswire / – The Chicago Board Options Exchange (CBOE) announced today that the Tuesday March 8, the Exchange will begin trading in newly designed Credit Event Binary Options (CEBO) contracts.

(Logo: http://photos.prnewswire.com/prnh/20100707/CBOOLOGO-a)

Credit event binary options contracts allow investors to express an opinion that a company will experience a “credit event” (bankruptcy). Due to the inverse correlations between credit and equity markets, CEBO® contracts can be used as a hedging tool for individual stocks. The contracts also offer the advantages of price transparency available through a regulated exchange, currently unavailable in the OTC credit default swap markets.

A CEBO contract has only two possible outcomes – a payment of a fixed amount if a credit event occurs or nothing if a credit event does not occur.

The CBOE, which began trading single-name and basket-credit event binary options in 2007, recently received SEC approval to change the rules for credit event binary options.

A change simplifies the terms of a payment for CEBO contracts, allowing the CBOE to list CEBO contracts that specify bankruptcy as the sole trigger for a payment.

The amount of the CEBO contract payment in the event of a credit event has also been revised. If bankruptcy occurs before the contract expires, the payment amount will be $ 1,000 by contract.

Initially, the CBOE will offer ten single-name CEBO contracts for negotiation. Two of these contracts will be introduced on 8 March, followed by eight out of March 9:


Company Name

CEBO ticker

Release date

AK Steel Holding Corporation

AKSC

8 March

Advanced Micro Devices, Inc.

AMDC

8 March

Arvinmeritor, Inc.

AMD

March 9

American Axle & Manufacturing Holdings, Inc.

AXLC

March 9

Hovnanian Enterprises, Inc.

HOVC

March 9

Huntsman Corporation

HUNC

March 9

MBIA inc.

MBID

March 9

The PMI Group, Inc.

PMID

March 9

Smithfield Foods, Inc.

SFDC

March 9

Tenet Healthcare Company

THCC

March 9


For contract specifications and other information on CEBOs, see www.cboe.com/credit.

CBOE, the largest options exchange in the United States and creator of listed options, continues to set the bar for options trading through product innovation, trading technology and educating investors. CBOE offers options on stocks, indices and ETFs, including proprietary products, such as the S&P 500 (SPX) options, the most active US index option, and options on the CBOE volatility index (VIX) . Other products designed by CBOE include equity options, safety index options, LEAPS options, FLEX options and benchmark products such as the CBOE S&P 500 BuyWrite (BXM) index. CBOE’s hybrid trading system integrates electronic and auction trading and is powered by CBOEdirect, a state-of-the-art proprietary electronic platform that also supports C2 Options Exchange (C2), CBOE Futures Exchange (CFE), CBOE Stock Exchange (CBSX) and OneChicago. CBOE is home to the world-renowned Options Institute and www.cboe.com, named “The Best of the Web” for options information and education.

The CBOE is regulated by the Securities and Exchange Commission (SEC), and all transactions are cleared by the AAA-rated Options Clearing Corporation (OCC).

CBOE®, Chicago Board Options Exchange®, CBSX®, CBOE Stock Exchange®, CFE®, CBOEdirect®, FLEX®, Hybrid®, LEAPS®, CBOE Volatility Index® and VIX® are registered trademarks, and BuyWrite (SM), BXM (SM), SPX (SM), C2 (SM), C2 Options Exchange (SM) , CBOE Futures Exchange (SM) and The Options Institute (SM) are service marks of Chicago Board Options Exchange, Incorporated (CBOE). Standard & Poor’s®, S & P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services, LLC. and have been authorized for use by CBOE.

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