NYSE Amex Options to offer trading in Binary Return Derivatives

NYSE Amex Options to offer trading in Binary Return Derivatives

Do not invest more money than you can afford to lose.

 

The New York Stock Exchange (NYSE) announced that the NYSE Amex Options platform of the NYSE MKT exchange will start trading of Binary Return Derivatives (ByRDs) on April 21. They will be offered by TradeKing Securities, part of TradeKing Group – a US online brokerage firm, providing online trading tools for buying and selling of stocks, options, bonds, mutual funds, forex, precious metals and offering financial advise to investors.

The ByRDs are instruments similar to the traditional binary options, but with clearly defined risk for both buyers and sellers and limited profit potential.

The ByRD instruments, that are to be traded on the NYSE Amex Options platform, will be based on an underlying security such as a stock or an exchange traded product (ETP). The fixed return per contract is $100, depending on whether the price of the underlying security goes above or below a given level on a defined future date. The capped maximum risk to the seller is also $100 per contract, less the premium received for selling the option. The ByRDs are cash-settled and exercisable only at expiration.

According to the press release, the NYSE Amex Options would be the first exchange platform to offer ByRDs on equities and exchange traded products to retail investors.

There will be two types of ByRDs:

Finish High ByRD
A Finish High ByRD is similar to a standard listed call option in that an investor purchasing a Finish High ByRD is bullish on the underlying security. Each long contract returns $100.00, if the NYSE ByRD Settlement ValueSM closes above the strike price on expiration Friday.

Finish Low ByRD
A Finish Low ByRD is similar to a standard listed put option in that an investor purchasing a Finish Low ByRD is bearish on the underlying security. Each long contract returns $100.00, if the NYSE ByRD Settlement Value closes below the strike price on expiration Friday.

The initial offering by TradeKing will include 15 higly-liquid equity and ETP securities, including AAPL, BABA, IBM, and SPY, with more names to be added in the future as the program expands.

“ByRDs open up a new opportunity for people to take advantage of the benefits options can deliver, but through a simpler-to-understand, regulated product that can work in up, down, sideways and turbulent markets, while appropriately limiting their profit and loss potential. We’re excited to be a part of the ByRDs’ debut,” said Don Montanaro, CEO of TradeKing Group.

According to US financial regulations, trading in traditional binary options is not permitted and the US Commodity Futures Trading Commission (CFTC) is merciless towards binary options brokers soliciting US residents. The only type of such products allowed for trading in the US are exchange-traded binary options, which are strictly regulated and carry lower risk for investors.

The two major US binary options exchanges are Nadex and Cantor. Earlier this month Nadex reported an impressive increase in trading volume and number of trades in the first quarter of this year.

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