CHICAGO, June 9 (Reuters) - The Chicago Board Options Exchange said on Monday it plans to offer binary options on the Standard & Poor's 500 Index .SPX and the CBOE Volatility Index on July 1,
The largest U.S. options market said the U.S. Securities and Exchange Commission approved its rule filing to list cash-settled binary options on broad-based indexes on May 22.
A binary option, which traditionally had been part of the over-the-counter market, is an option where the payoff is either a set amount or nothing at all.
CBOE binary options contracts, on which calls will be listed first, pay either a fixed cash settlement amount if the underlying index settles at or above the strike price at expiration, or nothing at all if the underlying index settles below the strike price at expiration.
The products are expected to attract a broad range of participants, including individual investors, hedge funds and institutions, who have an opinion, one way or another, on future price movements in the SPX or the VIX, said CBOE chairman and Chief Executive William Brodsky in a statement.
Through May, volume in SPX options rose to nearly 65 million contracts. Options on VIX, often called Wall Street’s fear gauge, totaled more than 10 million contracts. Both SPX and VIX notched record volume for the 2008 five-month period, CBOE said. (Reporting by Doris Frankel; Editing by James Dalgleish)