Chicago Board Options Exchange (CBOE) will add put binary options on the S&P 500 Index (SPX) – ticker BSZ – and on the CBOE Volatility Index (VIX) – ticker BVZ. The contracts, which were launched in July, initially featured call options only.
Binary options have only two outcomes a payoff of a set amount or nothing at all. Buyers and sellers of binary options – which can be bought or sold throughout the life of the contract will know precisely how much can be made or lost if the positions are held to expiration. Call options pay $100 if the underlying index settles at or above the pre-set strike price at expiration, or nothing at all if the index settles below the strike price. Put options pay $100 if the underlying index settles below the pre-set strike at expiration, or nothing at all if the index settles at or above the strike price.
In addition, because they are exchange-traded, CBOE binary options have clearing guarantees unavailable in over-the-counter markets. These options can be traded in a regular securities brokerage account that is approved for options.
D.C.