Cboe Quietly Expands Binary Options Playing Field
Published Date: 7/22/2026
Notice
Summary
Cboe Exchange is updating its rules to let traders buy and sell binary options on any index it already offers, with new morning and afternoon settlement times. They’re also changing position limits to apply per expiration date, making trading clearer and more flexible. These changes kick in quickly and could affect how much money traders can risk on these options.
Analyzed Economic Effects
7 provisions identified: 2 benefits, 4 costs, 1 mixed.
Full Margin and Cash-Coverage Rules
Margin rules require that a long binary option in a margin account be margined at 100% of the purchase price (premium) and a short binary option be margined at the full exercise settlement amount. For cash accounts, a short binary option must be covered by (1) cash equal to 100% of the exercise settlement amount, (2) a long binary of the same type paid in full with specified strike relations, or (3) an escrow agreement that holds assets equal to 100% of the exercise settlement amount.
Binary Options Added for MGTN Index
The Exchange may list binary index options on the Cboe Magnificent 10 Index (MGTN) in addition to broad-based indexes. This change explicitly narrows the filing to allow binary MGTN options (the Amendment superseded a broader proposal). If you trade options on the MGTN, a new binary product could become available to you.
Position Limits Set Per Expiration
Position limits for binary index options will apply on a per-expiration basis. For contracts where traditional options on the same index have no position limit, the limit is 15,000 contracts if the exercise settlement amount is $10,000 (and scales by the ratio of 10,000 to the exercise settlement amount). For indexes with position limits, the per-expiration limits are 10,000, 5,000, or 2,500 contracts depending on the market capitalization ratio (>=0.50, <0.50 and >=0.25, or <0.25 and >=0.10, respectively). Example: if exercise settlement = $1,000, the 15,000 rule scales to 150,000 contracts per expiration.
Hedged Positions Limited to Five Times
Certain hedged binary option positions and strategies will no longer be fully exempt from position limits; instead their position limits are set equal to five times the standard position limit under the rule. Qualified hedges include positions covered by cash equal to the settlement, by sufficient related securities, or by traditional options covering the same index.
A.M. and P.M. Settlement Allowed
The Exchange may designate binary index options as A.M.-settled or P.M.-settled for all permitted indexes, giving traders the choice of morning or afternoon settlement. This applies to broad-based indexes and the Cboe Magnificent 10 Index and matches settlement flexibility available for other index option products.
Last-Day Trading Cutoff at 4:00 p.m.
On their last trading day, expiring P.M.-settled binary index options will have Regular Trading Hours between 9:30 a.m. and 4:00 p.m. Eastern Time (instead of until 4:15 p.m.). This aligns cutoff with the close used to calculate index settlement values and shortens the final trading window by 15 minutes.
Aggregation and Exercise Limit Rules Clarified
Binary index positions with different exercise settlement amounts will be aggregated with each other for reporting and limit purposes, but binary index options will not be aggregated with non-binary option contracts on the same index or underlying securities. Also, binary index options are not subject to exercise limits because they are European-style and automatically exercise at expiration if in- or at-the-money.
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