CBOE To Relaunch Credit Event Binary Options (CEBOs) Contracts On March 8

The Chicago Board Options Exchange (CBOE) announced today that on Tuesday, March 8, the Exchange will begin trading newly-designed Credit Event Binary Options (CEBOs) contracts.

Credit Event Binary Options contracts allow investors to express an opinion on whether a company will experience a "credit event" (bankruptcy). Due to inverse correlations between credit and equity markets, CEBO® contracts can be used as a hedging tool for individual stocks. The contracts also provide the advantages of price transparency available through a regulated exchange, currently unavailable in over-the-counter credit default swaps markets.

A CEBO contract has just two possible outcomes - a payout of a fixed amount if a credit event occurs or nothing if a credit event does not occur.

The CBOE, which first began trading single-name and basket Credit Event Binary Options in 2007, recently received SEC approval to amend the Credit Event Binary Options rules.

One change simplifies the terms of a payout for CEBO contracts, allowing CBOE to list CEBO contracts that specify bankruptcy as the only trigger for a payout.

The size of the CEBO contract payout if a credit event occurs has also been revised. If a bankruptcy occurs prior to expiration of the contract, the amount of the payout will be $1,000 per contract.

Initially, CBOE will offer ten single-name CEBO contracts for trading. Two of those contracts will be introduced on March 8, followed by eight on March 9: