Options traders who have an opinion about where the OEX might go have three choices for trading that view: OEX, XEO and OEF options.

As the CBOE specifications page details, the three choices have some similarities and some differences. The OEX is the American-style option that can be exercised on any business day before the expiration; the XEO is the European-style option that can be exercised only on the last business day before expiration, and the OEF options are American-style options on an iShares S&P 100 that trades at 1/10 the value of the SPX.

Let's deal with the OEF first. Through the years, I've received questions about it, but I frankly don't know anyone who trades options on the OEF. As of Friday, August 28, 2009, the then-at-the-money SEP 48 call had open interest of exactly 62 and the put, 15. Volume for the day in the at-the-money calls was 10 and a big fat zero in the at-the-money puts. I'm afraid that these options, introduced a few months before the XEO options, have pretty much languished. That dispatches the OEF options in my eyes. I need volume and liquidity, and that's what most other option traders want, too.

However, if you're interested in these options, you should know that although they expire at the same time as the OEX and XEO options, they differ from those others in an important way. While the OEX and XEO options are cash settled, the OEF ones are settled by delivery of stock for in-the-money options. The underlying for these options is 100 shares of the OEF, an ETF managed by BGFA, Barclays Global Fund Advisors.

A recent CBOE "Ask the Institute" question and answer seemed to mix up one fact about the three: they all stop trading and expire on the same days. Instead, the expert answerer said that the European-style XEO options stopped trading the Thursday before expiration and were AM settled while the OEX options traded through Friday and were PM settled. According to the CBOE's own materials, "[t]rading in S&P 100 options will ordinarily cease on the business day (usually a Friday) preceding the expiration date," with that "Key Fact" applied to all three types of options. My broker lists all three as expiring the same day, too. I think that expert needs to consult the CBOE's own specification sheets. However, since the CBOE's expert and the CBOE's specification sheet differs, verify the information with your own broker.

The settlement value for the XEO and OEX options is listed as "OEX" and it's calculated from the closing value of each of the OEX's component stocks on the last day the options trade, usually the Friday before expiration. Both XEO and OEX options are cash-settled. That means that if one of the options ends up in the money once the settlement value is determined, the holder of that option will have cash deposited in his or her account "on the business day following expiration." For example, if I'd bought three OEX or XEO calls at the 475 strike, and, that expiration month, the OEX settled at 477, I'd have $600 dollars ($2.00 in the money x 3 contracts x 100 multiplier) deposited in my account "on the business day following expiration," according to the CBOE. If I'd sold that call, I'd have $600 deducted from my account.

I'm not really worried about assignment in this cash-settled index, so why do I trade XEO rather than OEX options? Habit. I found a number of years ago that I tended to get better executions in the XEO, and I've just stayed with it for that reason. As of Friday, August 28, 2009, open interest in the near-the-money XEO SEP 480 calls was 715, and volume was 445. For the OEX, the numbers were 2,512 and 483. Obviously, volume for the day was similar for the two contracts, so I'm not sure but that my perception is just that . . . my perception.

My warning here, then, is to go straight to the exchange's specification site for information on a specific options contract. Even the so-called expert appeared to have answered this question inexpertly. Do your own research and ask your broker to double-check it.