US Futures Exchange to launch weekly binary options

The Chicago-based US Futures Exchange (USFE) will offer weekly binary options, each with nine or more strikes, to let investors take positions on the performance of five assets - crude oil, gasoline, gold, silver and the euro. The contracts are valued at $1,000 and will provide independent, timely trading opportunities for retail customers beginning October 15.

USFE’s performance binary options allow for speculative trading on a single asset’s weekly price movement. Positions are taken based on perceived probability that the asset’s value will be a specific price or higher at expiration. Contracts will open for trading on Monday mornings and expire on Friday afternoons.

“Retail brokers and customers are looking for new short-term, limited risk trading opportunities that are simpler to understand than traditional derivatives,” said Satish Nandapurkar, chief executive of USFE. “Though the contracts are structured differently, USFE’s binary options trade with the same transparency and on-exchange protections as existing commodity and currency futures.”

The single asset performance contracts are the latest in USFE’s complex of binary-style products, which trade on an all-or-nothing basis and are fully margined. USFE’s binary contracts are worth $0 or $1,000 at final settlement. USFE listed binary event futures in April that let investors take a position on the outcome of the Chicago Board of Trade (CBOT) merger. Those contracts settled 13 July following the Chicago Mercantile Exchange’s purchase of CBOT.

“The first five selected assets show proven volatility on a weekly basis,” said Nandapurkar. “Oil, gasoline, gold, silver and euro prices are also critical points of reference in the trading community. Our contracts provide another way to hedge and speculate in these active markets.”