The US Securities and Exchange Commission (SEC) has approved a new category of binary options that will allow traders to bet on whether specific business metrics from companies such as Coinbase, Nvidia and Tesla meet predetermined targets.
The approval authorises Cboe Exchange, Inc. to list binary options tied to key performance indicators (KPIs) reported by 23 companies. The products will allow traders to take positions on corporate results, including revenue, trading volume, production figures and earnings per share.
Unlike traditional stock options, which derive their value from an underlying asset’s price, the new contracts will settle according to whether a specified company metric meets a predetermined threshold. The products will trade on Cboe’s US securities exchange under the regulatory framework applicable to listed securities.
How the New Contracts Work
The contracts use a binary payout structure, meaning each position has one of two possible outcomes. A winning contract pays $1, while a losing contract expires worthless.
For example, traders could take positions on whether Coinbase’s total trading volume exceeds a specified level or whether Nvidia’s data centre revenue meets a particular target.
Other contracts could track Tesla’s Model 3 and Model Y production figures or SpaceX’s total revenue.
The contracts will be cash-settled, European-style options, meaning they will settle in cash based on the specified outcome and can only be exercised at expiration.
Cboe’s proposed framework covers more than 100 company-specific metrics. The figures used to determine contract outcomes will be drawn from relevant company disclosures filed with or furnished to the SEC.
The structure allows traders to express a view on a particular business result without taking a direct position on the company’s stock price.
Robinhood to Offer the Contracts First
Robinhood Markets is set to become the first retail brokerage to offer the new products to eligible customers at launch.
Cboe and Robinhood announced their planned collaboration on September 30, ahead of the SEC’s approval. The companies said the contracts were expected to become available in October, subject to regulatory clearance.
Robinhood also plans to offer the contracts without trading fees through the end of 2026, according to the companies’ announcement.
The products are intended to expand access to event-based trading for retail investors interested in corporate earnings and business performance. However, access will depend on the brokerage’s rollout and applicable eligibility requirements.
SEC Approval Brings Prediction-Style Trading to a Securities Exchange
The approval places these binary KPI options within an established securities exchange framework rather than treating them simply as conventional prediction market contracts.
In its October 13 statement, SEC Chairman Paul Atkins said the products would be listed and traded as standardised, cash-settled options subject to securities laws and exchange rules.
These rules cover areas such as customer accounts, margin requirements, trading halts, order handling and market-maker obligations.
The distinction is important because the contracts combine event-based outcomes with the regulatory protections and trading infrastructure associated with listed securities.
However, the fixed payout structure also creates risks for traders. A contract that expires with the wrong outcome becomes worthless, meaning a trader can lose the entire amount paid for that position.
The approval adds another way for investors to trade expectations about corporate performance, extending financial markets beyond conventional bets on whether a company’s share price will rise or fall.
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