Between its Exchange, and its new all-electronic market C2, CBOE captured 26.7% of all U.S. stock and stock-index options trades in April 2011.

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But reasonably sophisticated investors can create the same product themselves by purchasing a risk-free zero-coupon Treasury bond and call options on a stock index, such as XSP options traded on the Chicago Board Options Exchange.

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The recipe calls for stock index Spiders and publicly traded options.

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The IRS treats returns from index options differently than individual stock options and counts a percent of gains as long-term capital gains.

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Once again, it would appear that options traders are offsetting long stock positions by purchasing index puts.

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And prior to that, he held several positions in the options and index products division at the New York Stock Exchange, ending his tenure as managing director.

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The underlying index to which the options apply, however, is less volatile than an individual stock because it represents a diversified basket of shares.

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