The New York Stock Exchange, which is part of the Intercontinental Exchange, has said that the NYSE Amex Option, a part of the NYSE MKT exchange will offer Binary Return Derivatives (ByRDs) trading by April 21, 2016.
NYSE Amex Options Launches New Binary Return Derivatives (ByRDs)
The NYSE Amex Option, described the ByRDs as a newly listed equity product with a limited risk and profit potential for buyers and sellers alike. The NYSE Amex Options is the pioneer of the ByRDs equities and exchange traded products (ETPs) to sell to investors.
Trading of ByRDs involves an underlying equity asset such as an ETP or a stock. These tradable underlying assets provide up to $100 per contract in fixed returns depending on whether the average volume-weighted price of the underlying asset is above or lower than a given level on a specific date in the future.
ByRD contracts are settled by cash and only exercisable at expiration. These are different from regular listed equity options even though ByRDs have some similar characteristic as the regular listed options. Such shared characteristics include standard expiration times, standard clearing times and fulfillment of settlement requirements at the Options Clearing Corporation.
The NYSE Amex Options offers ByRDs in two forms—Finish High ByRD and Finish Low ByRD. A Finish High ByRD works like a regular call option given that the trader buying a Finish ByRD has bullish sentiments on the traded underlying asset. Each contract offers a return of $100 if the NYSE ByRD Settlement ValueSM comes to a close above the set strike price by Friday.
The Finish Low ByRD works like a regular put option given that the trader buying a Finish Low ByRD has bearish sentiments on the traded underlying asset. Each contract offers $100 in returns if the NYSE ByRD Settlement ValueSM comes to a close below the strike price by Friday.
According to Ivan Brown, Head of Options at NYSE, “The introduction of ByRDs provides investors access to an innovative and simple income-generation tool that offers a similar level of flexibility as regular listed options, and a fixed return.”