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

Source: Nadex.com

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

Source: Nadex.com

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

Source: Nadex.com

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

Source: CBOE.com

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.

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