The New York Stock Exchange (NYSE) plans to launch trading in new binary return derivatives later this week.
The NYSE Amex Options platform will begin trading the new listed equity options products on April 21, NYSE announced on Tuesday.
The exchange operator claims to be the first to offer these sorts of options on equities and exchange traded products (ETPs) to retail investors.
The options offer a fixed return of US$100 per contract, based on whether the volume-weighted average price (VWAP) of the underlying security is above or below a given level on a defined future date. With fixed payouts, the structure limits both the upside profit potential, and the downside risk.
“The introduction of binary return derivatives, or ByRDs, on NYSE Amex Options gives investors access to a new, simple income-generation tool with the same level of flexibility as standard listed options, plus a straightforward, fixed return,” said the NYSE’s head of options, Ivan Brown, in a statement.
The exchange will initially list ByRDs on 15 highly liquid equity and ETP securities, and plans to expand the list in the future.
Regulators have repeatedly warned investors about the risks of trading with unregistered, offshore binary options platforms, which can expose investors to the threat of investment fraud and identity theft, among other risks.
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