SEC approves Cboe binary options on company KPIs

On 13 October the SEC gave accelerated approval for Cboe Exchange to list binary options on key performance indicators (KPIs) that companies report in their earnings filings. The contracts are cash-settled, European-style, standardised options. Their payout depends on a reported metric, not on the share price.

Chairman Paul Atkins said in a statement that the order reflects “a new spirit of harmonization, innovation, and investor choice”. He also stressed its limits. The approval covers only these contracts on a securities exchange and “does not foreclose” CFTC jurisdiction over KPI contracts on the same metrics if they are structured differently.

How the contracts work

Under new Cboe Rules 4.80–4.82, each binary KPI option pays a fixed exercise settlement amount, normally $1, if the chosen KPI is at or above the strike (for calls) or below it (for puts) at expiry. Otherwise it pays nothing.

• Settlement value: this is taken from the issuer’s earnings-related filing with the SEC, “and not the press release disclosing earnings results”. Contracts are A.M.- or P.M.-settled depending on whether the company reports before or after the regular-hours open.
• Restatements: a later restatement does not change a settled payout.
• Unreported KPIs: if the KPI is not reported, OCC’s alternative settlement procedures may pay an amount between $0.01 and $1.00, based for example on the last closing price.

Proposed Rule 4.81 lists the eligible issuers and metrics. There are 23 companies, including:

• Apple, Alphabet, Amazon, Microsoft, Meta, NVIDIA and Tesla
• the banks JPMorgan, Bank of America and Citigroup
• Coinbase, Robinhood, SoFi, Palantir and Marathon Digital

Each KPI is a separate option class. Metrics run from diluted EPS to operating data such as Meta’s Family Daily Active People, Tesla’s Model 3/Y production and Robinhood Gold subscribers.

Amendment No. 1 set a 25,000-contract position limit and limited a proposed position-limit exemption to registered market makers. The order notes that strike intervals can be $0.01 in rule terms. In practice that cent corresponds to a large step in the underlying figure, such as $10m of revenue.

Surveillance and halts

According to the order, Cboe will work with FINRA, which carries out options insider-trading surveillance under the industry’s regulatory surveillance plan, to update its surveillance for the products. Trades will be reported to the CAT in the same way as other options, and FINRA CAT told the exchange no technical changes are needed.

Unusually, Cboe does not plan to halt KPI options automatically whenever the issuer’s stock is halted. It argues that the product’s “discrete, disclosure-driven nature” means traders should be able to keep managing positions, though it can still halt if needed for a fair and orderly market. The order records that Cboe neither solicited nor received written comments on the filing.

Why it matters

This is the securities-market answer to earnings-linked event contracts. For options market makers, it means quoting a binary instrument whose value moves on one disclosure, not continuously with the share price. Pricing models will look more like those for earnings-surprise distributions than standard volatility surfaces.

For compliance teams, the MNPI risk is obvious. Anyone with early sight of a segment revenue line has a direct, cheap way to trade on it. Firms should make sure restricted lists and personal-account rules cover the new classes from the first day of listing.

The SEC’s careful wording on CFTC jurisdiction leaves room for DCMs to list competing products.

Sources

• SEC Release No. 34-106659 (SR-CBOE-2026-061), 13 October 2026 — https://www.sec.gov/files/rules/sro/cboe/2026/34-106659.pdf
• Statement of Chairman Paul S. Atkins, 13 October 2026 — https://www.sec.gov/newsroom/speeches-statements/atkins-101326-statement-commissions-approval-proposed-rule-change-permit-listing-binary-options-overlying-key