Binary Options

Exchange

CBOE

Description

Based on an underlying index a binary option, is an “all or nothing” option. A binary call option pays a fixed cash settlement amount if, at expiration, the settlement value is at or above the strike price and would be worthless if settlement is below the strike price. Conversely, a binary put option pays a fixed cash settlement amount if, at expiration, the settlement value is below the strike price and would be worthless if settlement is above the strike price.

Exercise and assignment activity results in the exchange of $100. No exchange of actual shares or units of the underlying occur.

Expiration Settlement Values

Binary index options will settle based on the same settlement value that the standard underlying index options settle against. Specifically, on expiration, VIX binary options will settle against VRO. SPX binary options will settle against SET.

Exercise Settlement Values

If, at expiration, the price of the underlying security closes at or above the selected strike price, the call buyer receives a set payout per contract. If the underlying security closes at a price that is below the strike price on the expiration date, the call buyer receives nothing. As with traditional options, a Binary option position may be liquidated (bought or sold to close) prior to expiration.

Strike Price Intervals

Generally, $1 for VIX; $5 for SPX.

Premium Quotations

Bids and offers will be expressed in pennies, and will range from 0.00 to 1.00. For example, a premium bid of $0.10 would mean an investor selling would receive $10.00 per contract sold before commissions.

Exercise Style

European. Binary options may be exercised only on the business day prior to the expiration date. Option writers are therefore, not subject to early assignment. In the money options will be exercised automatically in lieu of other instructions and will result in a transfer of $100 from the seller to the buyer.

Expiration Months

Initially, three consecutive, near term months will be available for trading.

Expiration Dates

Same as the standard options on the same underlying security. Investors should be familiar with the expiration dates prior to investing. Please refer to the expiration calendars for specific information on expiration dates.

Last Trading Date

VIX: The day prior to the Expiration Date of each month.
SPX: The business day (usually a Thursday) preceding the day on which the exercise-settlement value is calculated.

Position Limits

1,500,000 contracts on the same side of the market. Position limit information can also be found at the OCC's position limit data.

Minimum Customer Margin

For both for calls and puts, long positions must be paid in full. Short positions will require the seller to post the difference between the premium received and $100 per contract sold short. The premium must remain in the account.

Trading Hours

9:30 a.m. EST to 4:15 p.m. EST
The same trading hours as the standard listed options on the same underlying security.

Additional Information

Prospective investors are encouraged to review the complete VIX Binary Options and SPX (S&P 500) Binary Options product specifications on the CBOE website.