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The Chicago Board of Trade (CBOT®) today announced that its Binary options on the Target Federal Funds Rate contract set a record on Wednesday, as volume rose to 1,426 contracts at the close of trading. The new high mark topped the previous record of 769 contracts – set Tuesday, August 8 – by 85 percent.
The CBOT launched the electronically-traded Binary options on the Target Federal Funds Rate contract on July 12, 2006. The first contract settled on Tuesday, August 8 when the U.S. Federal Reserve elected to hold the Target Federal Funds Rate at 5.25 percent.
At expiration, Binary options on the Target Federal Funds Rate contracts have two possible outcomes – final settlement is either a fixed dollar amount or nothing at all. When the options expire, “in the money” options pay $1,000 to option holders, while those that are “at the money” or “out of the money” pay holders zero. Strike prices correspond to the Target Federal Funds rate using a formula of 100-minus the actual Target rate. Options usually expire on the last day of a regularly-scheduled FOMC meeting – they are cash-settled and based upon the most recent Target rate level.
For more information, visit the Binary Options section on cbot.com.
