NYSE American Prepares Binary Options on Apple, Nvidia and Tesla

NYSE American plans to begin trading binary options on 12 U.S. stocks and exchange-traded funds within days, introducing contracts that pay a fixed amount based on each security’s closing price.

The identified underlyings include Apple (AAPL), Nvidia (NVDA), Tesla (TSLA) and the SPDR S&P 500 ETF Trust (SPY). The complete 12-security roster has not been disclosed.

Called Binary Return Derivatives, or ByRDs, the contracts have two possible outcomes at expiration. A Finish High contract pays $100 if the underlying closes at or above its strike price. A Finish Low contract pays $100 if it closes below the strike. Contracts are automatically exercised at expiration, and a contract that misses its price condition pays $0.

The revised rules set settlement using the closing price reported by the underlying security’s primary listing market on the expiration date. That replaces the previous all-day composite volume-weighted average price.

For individual stocks, NYSE American now requires a market value of at least $290 billion, up from $40 billion. Eligible stocks must also have at least $10 million in average daily trading value in the primary listing market’s closing auction over the preceding six months. NYSE American estimated that about 100 securities would meet the criteria; that is the eligible pool, not the initial 12-security slate.

The Securities and Exchange Commission (SEC) waived the standard 30-day delay for the exchange’s rule change, which NYSE American filed Oct. 21. The revisions became operative upon filing. The SEC may temporarily suspend the change within 60 days of that date.

ByRDs were approved in 2007 as Fixed Return Options. In 2014, the SEC approved the name change to Binary Return Derivatives and the product’s relaunch. The price-based contracts differ from Cboe’s planned KPI options, which are tied to company performance metrics.

NYSE Chief Product Officer Kevin Tyrrell described “a lot of interest in newer ways to trade.”