In the US, there are a number of assets and securities available for trade through binary options. A binary option is a derivative; its value is derived from an underlying security or asset. The binary option holder does not own the underlying security, nor have claim to it. Rather, the binary option becomes profitable or worthless based on the price movements of the underlying security. Binary options provide an alternative way to trade these underlying securities, which include stock and volatility indexes, foreign currency (forex) pairs, and commodities.
Where Binary Options Are Traded
In the US, binary options are legally traded through the Nadex exchange and the Chicago Board Options Exchange (CBOE). Nadex provides the most binary options, as well as the most actively traded binary options in the country. A broker is not required for trading Nadex products. An account is set up with the exchange itself, and trades are made through a provided platform. The CBOE offers two binary options products. In order to trade these products, clients need a standard brokerage account with options trading capabilities.
Available Binary Options Securities
Binary options are based on a number of underlying securities and events. Nadex provides trading in stock indexes, forex pairs, commodities, spreads, and economic announcements.
Figure 1. Stock Indexes Tradable Through Nadex Binary Options
|Stock Index Future (Underlying)||What You're Trading||Nadex Binary Option Product|
|CBOT E-Mini Dow Futures||30 Major US Companies||Wall Street 30|
|CME E-Mini S&P 500 Futures||500 US Large-Cap Stocks||US 500|
|CME E-Mini Nasdaq 100 Futures||100 Non-Financial Stocks||US Tech 100|
|Ice Mini Russell 2000 Index Futures||2000 US Small-Cap Stocks||US Small-Cap 2000|
|Liffe FTSE 100 Index Futures||Largest 100 UK Stocks||FTSE 100|
|Eurex DAX Index Futures||30 Major Frankfurt Stock Exchange Equities||Germany 30|
|SGX Nikkei 225 Index Futures||225 Major Tokyo Stock Exchange Equities||Japan 225|
Nadex binary options are also traded based on the spot price of the following underlying forex pairs: EUR/USD, GBP/USD, USD/JPY, EUR/JPY, AUD/USD, USC/CAD, GBP/JPY, USD/CHF, EUR/GBP and AUD/JPY.
Seven commodities are tradable via binary options on Nadex.
Figure 2. Commodities Tradable Through Nadex Binary Options
|Commodity Futures (Underlying)||Nadex Binary Options Product|
|COMEX/NYMEX Gold Futures||Gold|
|COMEX/NYMEX Silver Futures||Silver|
|COMEX/NYMEX Copper Futures||Copper|
|NYMEX Crude Oil Futures||Crude Oil|
|NYMEX Natural Gas Futures||Natural Gas|
|CBOT Corn Futures||Corn|
|CBOT Soybean Futures||Soybeans|
Binary options are also traded based on the outcome of three major economic news events.
Figure 3. Events Tradable Through Nadex Binary Options
|Event||Nadex Binary Option Product|
|Federal Reserve Rate Decisions||Fed Funds Rate|
|Jobless Claims Report||Jobless Claims|
|Nonfarm Payrolls (NFP) Report||Nonfarm Payrolls|
All the above products--stock indexes, forex pairs, commodities, and events--are also available for trade through a binary option called a "bull spread." This option provides both a ceiling and floor, capping the profit and loss no matter how far the underlying market moves.
The CBOE offers two binary options products; one of which is the only binary option tied directly to volatility.
Figure 4. CBOE Binary Option Products
|Underlying Index||CBOE Binary Options Ticker Symbol|
|S&P 500 Index||BSZ|
|CBOE Volatility Index (VIX)||BVZ|
For ideas on how to trade CBOE binary options, see Applying Binary Options To Equity Markets.
The Bottom Line
When trading binary options in the US, there are a number of underlying securities and assets available. Nadex is the main provider, offering binary options on stock indexes, forex pairs, commodities, and events. Nadex binary options are traded through the Nadex trading platform, and a broker isn't required. CBOE binary options are limited to the S&P 500 and Volatility Index, and are traded through options eligible brokerage accounts. Various binary options products are traded outside the US, based on similar underlying assets.