CHICAGO: Cboe Global Markets Inc has announced it has brought back a type of S&P 500 contract after a hiatus of more than a decade, which in the meantime has become a popular mainstay of prediction market platforms Kalshi and Polymarket.
The Chicago-based derivatives exchange operator is listing binary options on the Mini-S&P 500 Index, the company said in a statement on Tuesday.
The products will allow customers to place a “yes” or “no” bet on whether the S&P 500 will hit a certain threshold.
The options will initially be available through Interactive Brokers Group Inc, with other intermediaries, including the Charles Schwab Corp set to offer the products soon.
Cboe index options have been a favourite tool of retail investors since S&P 500 index options expiring daily came out in 2022.
Retail traders have pushed United States options volumes to record levels, and contracts with zero-days to expiration (0DTE) accounted for 30% of all volume, according to data from Bloomberg Intelligence.
“Following the success of SPX 0DTE options, we’ve seen continued customer demand for shorter-dated, outcome-based trading, and that created a natural opportunity for Cboe to enter prediction markets,” said JJ Kinahan, head of retail expansion and alternative investment Products at Cboe.
Cboe has tried binary options before. In 2008, it first listed these type of options on the S&P 500 and the Cboe Volatility Index, but they failed to attract investor interest and were pulled off the exchange.
The last SPX binary option expired in January 2015 and last VIX binary option ended in August 2017, according to a spokesperson.
The options bourse is adding a twist on the traditional event contract binaries, based on a core building block of options trading, known as a “vertical spread”.
Cboe’s “plus” product pays out a proportional amount if the index moves in the direction predicted by the customer, up to 100% if they meet an upper threshold specified in the contract.
While the customer interface will show a single trade, their broker is placing a package made up of a bought option and a sold option.
Behind the scenes, two options trades are taking place: a customer making a bullish trade is buying a lower strike call, and funding the position by selling a higher strike call. Cboe executives are hoping the products will bring new participants to the options market.
“With the ‘plus’ feature, traders can define their risk beyond the simple ‘yes-or-no’ framework of traditional event contracts.
“We’re also pairing these products with dedicated educational resources to support more informed customer participation in these markets.”
Nasdaq Inc also has regulatory approval to launch binary index options contracts, which are expected to list later this year. — Bloomberg
