CBOE Binary Options are a pure and simple way to trade based on your opinion of where a market is headed over a certain period of time.
They are contracts that, at expiration, pay out a pre-determined, fixed amount or nothing at all. The payout amount for CBOE Binary options is $100.
Like traditional options, Binary Options are based on an underlying security, have various strike prices to choose from as well as various expirations. CBOE lists both call and put Binary Options. If, at expiration, the price of the underlying security closes at or above the selected strike price, the buyer of a call Binary Option receives $100 per contract. If the underlying security closes at a price that is below the strike price on the expiration date, the buyer receives nothing.
In the case of put Binary Options, the put buyer receives $100 per contract if the underlying security closes below the strike price at expiration, and nothing if the underlying security closes at or above the strike price at expiration.
As with traditional options, a Binary option position may be liquidated (bought or sold to close) prior to expiration.
The price of a Binary Option usually reflects the perceived probability that the underlying security price will reach or exceed (for call Binary Options) or fail to reach or exceed (for put Binary Options) the selected strike price at expiration. The cost of CBOE Binary Options will normally be quoted at a price between zero and $1 (which equates to $1 to $100 per contract). Buyers of Binary Options pay for the contract at the time of purchase.
"CBOE's binary options provide a straightforward way for investors to act on their views of two of the most closely followed indexes in the world, the S&P 500 and the CBOE Volatility Index,"
"These products will appeal to the broad range of market participants, including individual investors, hedge funds and institutions, who have an opinion, one way or another, on future price movements in SPX or the VIX."
CBOE Chairman and CEO William J. Brodsky
CBOE offers Binary Options on the S&P 500 Index (SPX) and the CBOE Volatility Index (VIX). The ticker symbols for these Binary contracts is BSZ and BVZ respectively. Expiration dates and settlement values are the same as for traditional options.
CBOE Binary Options are cleared through the Options Clearing Corporation (OCC) and can be traded in a regular securities account that is approved to trade options.