Binary option contracts have long been available Over-the-counter (OTC), i.e. they  are directly sold directly by the issuer to the buyer. In the past they were generally considered “exotic” instruments and for trading these instruments between their issuance and expiration, there was no liquid market. They had been usually seen embedded in more complex option contracts.

In 2007, a rule change had been proposed by the Options Clearing Corporationto allow binary options, and listing cash-or-nothing binary options had been approved by the Securities and Exchange Commission in 2008. In May 2008, exchange-traded European cash-or-nothing binary options had been launched by the American Stock Exchange (Amex), which was followed by the Chicago Board Options Exchange (CBOE) in June 2008. Due to the standardization of binary options they are allowed to be exchange-traded with continuous quotations.

On some ETFs and a few highly liquid equities such as Citigroup and Google, binary options are offered by Amex. Amex calls binary options as “Fixed Return Options”; calls are referred to as  “Finish High” and puts are known as “Finish Low”. Amex FROs use a “settlement index” to reduce the threat of market manipulation of single stocks.

The “settlement index” is defined as a volume-weighted average of trades on the expiration day. In 2005, a patent application has been submitted by the American Stock Exchange and Donato A. Montanaro submitted, it has been submitted for exchange-listed binary options using a volume-weighted settlement index .

Binary options are offered by CBOE offers on the S&P 500 (SPX) and the CBOE Volatility Index (VIX). For these the tickers  are BSZ and BVZ, respectively. Only calls are offered by CBOE, as binary put options are trivial to create synthetically from binary call options. BSZ strikes are at 5-point intervals and BVZ strikes are at 1-point intervals. The opening prices of index basket members is the basis of the actual underlying to BSZ and BVZ .

Both Amex and CBOE listed options are having values between $0 and $1, with a multiplier of 100, and tick size of $0.01, and they are cash settled.

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