ISE, CBOE, PHLX - These are not just jumbles of alphabet soup or government departments. Each of these acronyms stands for a specific options exchange, such as the Chicago Board Options Exchange (CBOE).

In today’s trading environment, the options trader is not going to pick what exchange their order will be filled by. Good brokers will “route” your order to the best price available regardless of which exchange that is.

The exchanges serve an important function. They are the physical and electronic gathering place for options “market makers.” If you are selling an option, it is typically a “market maker” that is buying it, and they may be immediately selling it to another options trader that is trying to buy the same option. These market makers act as middle-men to make sure the market is liquid and efficient, and constantly trading.

Sometimes, these transactions are nothing more than a computer routing the order from one place to the other. Other times there is an actual person representing the market maker executing your trade.

In today’s trading world, most of this work is done behind the scenes and a normal options trader really doesn’t give it much thought. If you are working with a good broker they have systems in place to assist your orders to make it to the best exchange, price and market maker to increase your probability of making a profit.

In the video below, we will talk about a few benefits offered by the exchanges that you may not know about, and discuss how you can take advantage of them. This includes education and training, product information and market data.

Watch the video below then proceed to Options Pricing