In 2015, the New York Stock Exchange (NYSE) jumped on the binary option bandwagon by launching their very own Binary Return Derivatives Option (ByRD). NYSE ByRDs come in two different variants: Finish High ByRD and Finish Low ByRD. You can read more about the differences between the two further down on this page.
Short facts about NYSE ByRDs
Strike prices are available in increments of 1 USD.
Minimum one contract, and in multiples of one contract
All ByRDs qualify for weekly expiration on Fridays.
European-style. ByRDs can not be exercised until the expiry date.
All ByRDs are cash settled.
Short positions will require maintenance of difference between premium received and 100 USD per contract.
Finish High ByRD
A Finish High ByRD will pay out to the holder of the ByRD if the underlying price is high enough when the ByRD expires, in accordance with the terms of the ByRD contract.
This means that Finish High ByRDs tend to be purchased by speculators with a bullish view; the same ones that would also be interested in traditional call options. They believe that the underlying is going up.
If you change your view to bearish while owning a Finish High ByRD, you can always attempt to sell it on NYSE. You can not exercise the option until the expiry date, but you can sell it.
Finish Low ByRD
A Finish Low ByRD will pay out to the holder of the ByRD if the underlying price is low enough when the ByRD expires, in accordance with the terms of the ByRD contract.
This means that Finish Low ByRDs tend to be purchased by speculators with a bearish view; the same ones that would also be interested in traditional put options. They believe that the underlying is going down.
If you change your view to bullish while owning a Finish Low ByRD, you can always attempt to sell it on NYSE. You can not exercise the option until the expiry date, but you can sell it.
The binary option market in US
The fact that the famous New York Stock Exchange has launched their own binary option shows how great investor demand for this type of instrument is. When binary options first began to appear online, they were often (and sometimes rightly so) ridiculed by experts who regarded them as online casino games rather than proper investments. Today, the market has matured considerably and there are plenty of reputable binary options available that offer binary options with sensible terms and conditions. We also have Malta and Cyprus, two European countries within the EU, that have classified binary options as financial instruments and demanded that vendors obtain the license required for this type of companies.
In the United States, binary options have been offered by the American Stock Exchange and the Chicago Board Options Exchange since 2008, when the U.S. Securities and Exchange Commission approved exchange-traded binary options. Exchanges such as Cantor and NADEX soon followed in suit, but it would take until the mid-2010s before NYSE made their move into the lucrative binary option field with the ByRD.
With NYSE offering their ByRD, binary options can no longer be nudged aside and labelled a high-stakes parlour game. It is clear that binary options are in the US to stay.