Binary Options on Company KPIs: How Cboe's Contracts Work

The SEC order (Release No. 34-106659, file SR-CBOE-2026-061) grants accelerated approval for Cboe Exchange to list binary options overlying key performance indicators. A key performance indicator, or KPI, is a financial or operating metric that a company discloses in a Form 8-K, 10-Q or 10-K filing.

The rule lists 23 issuers and the specific KPIs eligible for each. They include crypto-linked names such as Coinbase, Robinhood and Marathon Digital, alongside large companies like Apple, Microsoft, NVIDIA and Tesla. The order states that the options will clear through Cboe Clear US, and that Cboe will not list them until the clearing house's required filings are approved or effective.

Investor.gov defines a binary option as an option whose payout depends on a yes-or-no question. It is exercised automatically, and it does not give the holder the right to buy or sell the underlying asset. At expiry the holder receives either a fixed amount of cash or nothing, which is why the SEC and CFTC have described them as all-or-nothing or fixed-return options.

In the Cboe design, a call pays if the reported KPI is at or above the strike, and a put pays if it is below. The default settlement amount is $1 per contract. Prices therefore trade between zero and one dollar.

• Illustrative example: a call on a quarterly revenue figure trades at $0.35. The buyer pays $0.35 per contract.
• If the filed figure is at or above the strike, the contract settles at $1 and the buyer's gain is $0.65. If not, it settles at zero and the loss is the $0.35 paid.
• Ignoring fees, a $0.35 price means the market is valuing the yes outcome at roughly 35%. That is a price, not a forecast, and it moves as traders change their view.

Expiry is tied to the company's reporting date: the order describes it as the date on which the issuer discloses the results that include the KPI. If the date is not yet known, a placeholder date is used. Settlement is in the morning or the afternoon depending on whether the company reports before the open or after the close.

The settlement value is the figure shown in the SEC filing on the expiration date. Later restatements do not change it. If the KPI is not available, the clearing house's alternative procedures can settle at a value between $0.01 and $1.00 based on the option's last closing price. The options are European-style and cash-settled: nothing can be exercised early, and no shares change hands.

• No leverage, no margin calls. The order states that binary KPI options will be fully funded under current margin rules. The most a buyer can lose is the price paid, so there is no liquidation and no funding cost.
• Fixed payout. A crypto future or perpetual gains or loses with every tick of the price. A binary pays the same $1 whether the KPI beats the strike by a little or by a lot.
• A reported number, not a price. The underlying is a figure in a company filing, such as trading volume or bitcoin produced, rather than a market price that trades every second.
• One date that matters. Value can change before expiry, but the outcome is decided on a single reporting day. Perpetuals have no expiry at all.

Cboe can list several strikes on the same KPI and expiry, and together their prices sketch how the market sees the range of possible outcomes. Because each call pays $1 if the figure is at or above its strike, the gap between two neighbouring call prices is the value placed on the figure landing between those strikes.

• Illustrative example: calls on the same quarterly figure at three rising strikes, A, B and C, trade at $0.80, $0.45 and $0.15.
• Read together, the market values a result at or above A at about 80%, between A and B at about 35% (0.80 − 0.45), between B and C at about 30% (0.45 − 0.15) and at or above C at about 15%.
• These are prices set by traders, before fees and spreads, and they can be wrong. They are useful as a description of consensus, the same way funding describes positioning on a perpetual.

The order sets a position limit of 25,000 standard option contracts per expiration, with 100 binary KPI contracts counting as one standard contract. Positions are not added together across different expirations or different KPIs. Strikes are scaled by a thousand, a million, a billion or a trillion, depending on the size of the metric.

The 2013 investor alert issued jointly by the SEC and CFTC is still a useful warning. It explains that some binary options trade on registered exchanges, but that a large part of the market runs through internet platforms that may not follow U.S. rules, with complaints about refused withdrawals, identity theft and manipulated software. It also shows how a fixed payout can give a negative expected return even when the odds look even. Checking that the venue and the broker are registered is the first step.

For traders used to perpetuals, KPI binaries are a clean example of a defined-risk contract: the cost is known on entry, there is no funding to pay and no engine that can close the position early. The trade-off is the payout, which is capped at the settlement amount.

The listed KPIs for Coinbase and Robinhood also connect to the crypto cycle: a market reading on trading volume or customer activity is, indirectly, a reading on how busy retail crypto trading is expected to be. Like open interest or funding, the price of such a contract describes positioning. It does not tell you what the company will report.

• SEC: Release No. 34-106659, order approving Cboe binary options on key performance indicators (13 Oct 2026)
• Investor.gov (SEC): Binary options, glossary
• Investor.gov (SEC and CFTC): Investor Alert, Binary Options and Fraud