Cboe expands prediction markets suite with mini-Russell 2000 binary options

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Highlights

Cboe launched mini-Russell 2000 Index (MRUT) binary options under ticker MRTBW, structured as yes-or-no trades paying $100 or $0 per contract.
Cboe reported record demand for its Russell 2000 Index options with average daily volume of 85,000 contracts through the first three quarters.
Cboe's prediction markets suite now spans small- and large-cap indices with products soon to include SEC-regulated corporate earnings metrics available via select retail brokers.

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Launch adds small-cap exposure to product lineup

According to Cboe, Cboe Exchange said the new mini-Russell 2000 Index, or MRUT, binary options trade under the ticker MRTBW and are based on an index that is one-tenth the size of the Russell 2000 Index.

The contracts are structured as yes-or-no directional trades that pay either $100 or $0 depending on whether MRUT settles at, above or below a specified level. Cboe said it will list P.M.-settled contracts expiring on the same and next trading day, while the offerings are centrally cleared through the Options Clearing Corporation.

JJ Kinahan, head of retail expansion and alternative investment products at Cboe, said small-cap stocks are closely followed by retail investors and can play an important role in portfolios. He said the Russell 2000 Index has typically been more volatile than other broad market gauges, helping drive demand for zero-days-to-expiry options tied to the index in recent years.

Retail demand and index access support expansion

FTSE Russell's Shawn Creighton, director of index derivatives solutions, said the Russell 2000 Index remains the leading benchmark for the U.S. small-cap equity market and that the latest launch builds on the group's longstanding partnership with Cboe. He said the new product gives investors additional ways to access U.S. small caps and manage risk.

The Russell 2000 Index tracks about 2,000 of the smallest companies in the U.S. equity market and sits within the broader Russell 3000 Index, which is designed to represent roughly 98% of the investible U.S. equity market. Cboe said its traditional Russell 2000 Index options suite has seen record demand, with average daily volume of 85,000 contracts through the first three quarters.

With the launch, Cboe's prediction markets suite now covers small-cap and large-cap equities linked to the S&P 500 Index. The company also said the lineup will soon include certain SEC-regulated corporate earnings metrics, with the products available through select retail brokers.

As we previously wrote, the S&P 500 hovered near 8,000 as investors weighed higher oil prices, elevated Treasury yields and midterm-election uncertainty.

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