Although there are many broad market indexes upon which options can be played, this discussion will focus exclusively on S&P 100 Index (OEX) options. The OEX is a composite of 100 large-capitalized stocks which have options that trade on the Chicago Board Options Exchange (CBOE). The stocks in the index are not equally weighted - the larger the capitalization of the stock, the greater the influence on the overall index. However, even a powerful move by a large individual name might not move the OEX very much because it is such an effective cross-section of the overall market.

To be a successful OEX option trader, one must have a good understanding of how the OEX moves. The OEX is not like a stock that may trend for long periods of time with very little volatility, rather, it tends to make much more wild price swings. In fact, the distance from the daily low to the daily high on the OEX averages more than 1% of the OEX’s value. Frequently, opportunities for buying OEX options often come following a significant move in one direction which may be "corrected" slightly over the ensuing short term. Short-term moves in the OEX can frequently be likened to a rubber band that will snap back if pulled too hard in one direction.

The OEX can move quickly enough to produce substantial profits in its options over only a few days. A 2% advance in the OEX over 2-3 days will frequently push OEX call options as much as 75% higher. Considering that the OEX advances more than 1% from its daily low to its daily high on any given day suggests there is great potential for solid profits to be generated in less than one week. However, there is a great deal of premium priced into OEX options due to the index’s volatility. Therefore, OEX options experience a greater amount of time decay than stock options normally do. These are some of the reasons OEX option buying is so exciting, as trades must be entered and exited very quickly or else time decay will erode a substantial amount of premium.