{"id":244519,"date":"2026-06-18T11:21:19","date_gmt":"2026-06-18T15:21:19","guid":{"rendered":"https:\/\/ibkrcampus.com\/campus\/?p=244519"},"modified":"2026-06-18T11:21:23","modified_gmt":"2026-06-18T15:21:23","slug":"so-two-outcomes-walk-into-a-market","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/podcasts\/ibkr-podcasts\/so-two-outcomes-walk-into-a-market\/","title":{"rendered":"So, Two Outcomes Walk Into a Market.."},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Binary options are making a comeback, but how do they actually work and how do they compare to traditional options trading? In this IBKR Podcast episode, Mat Cashman from the OCC breaks down binary options, fixed payouts, implied probabilities, risk management and why these outcome-based products are attracting renewed interest in today&#8217;s markets.<\/p>\n\n\n\n<figure class=\"wp-block-audio\"><audio controls src=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/06\/pod-20260608-occ_final_disclosures_mixdown.mp3\"><\/audio><\/figure>\n\n\n\n<h2 id=\"h-summary-ibkr-podcasts-ep-396\" class=\"wp-block-heading\">Summary \u2013 IBKR Podcasts Ep. 396<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><em>The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made<\/em>.<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Hi, everyone. This is Jeff Praissman with Interactive Brokers, and\u00a0it&#8217;s\u00a0my pleasure to welcome back to the Interactive Brokers Podcast Studio,\u00a0Mat\u00a0Cashman from the OCC. Hey,\u00a0Mat, how are you?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">I&#8217;m\u00a0doing great, Jeff.\u00a0I&#8217;m\u00a0happy to be here again.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-0\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Love having you come in for our podcast. And for our listeners,\u00a0Mat\u00a0contributes a ton to our education site between webinars, podcasts, education\u00a0materials, and of course you can always find him on occ.org as well.\u00a0So\u00a0Mat, what are we\u00a0gonna\u00a0talk about today?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-0\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Today\u00a0we&#8217;re\u00a0talking about binary options. They are back.\u00a0It&#8217;s\u00a0an\u00a0interesting history\u00a0history\u00a0lesson, as well as a bit of a survey of what the market structure looks like right now.\u00a0So\u00a0I&#8217;m\u00a0excited to talk about them.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-1\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, there really is a renewed interest, especially in these outcome-based products, right? With the super high growth of short-dated options and of course,\u00a0prediction\u00a0market\u00a0style of trading as well.\u00a0So\u00a0with that,\u00a0let&#8217;s\u00a0get into it.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-1\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah.\u00a0So\u00a0I think it&#8217;s really worth discussing this because these products sit right at the intersection of several things that are happening at\u00a0the&#8211; in the\u00a0market at the same time.\u00a0So\u00a0as you said, we have investors who have become much more comfortable thinking in terms of really specific outcomes. Will the market finish above this level? Will it finish below that level? Can I define my risk around a specific event or a specific\u00a0time period? And at the same time, we have listed\u00a0options\u00a0markets that have already moved heavily toward the shorter duration, like you mentioned.\u00a0So\u00a0the growth of the 0DTE index options has kind of trained a lot of people to think about intraday or very short-term outcomes.\u00a0So binary options take that outcome-based idea and\u00a0kind of simplify\u00a0the\u00a0expiration\u00a0payout. So instead of asking how far\u00a0does the underlying move beyond the strike, the binary question is much cleaner.\u00a0It&#8217;s\u00a0does this underlying finish on the right side of this strike or on the wrong side of this strike, as far as\u00a0that&#8217;s\u00a0concerned?\u00a0So that simplicity is useful, but it also creates an educational challenge, which is part of the\u00a0reason why\u00a0I&#8217;m\u00a0starting to talk about it. A simple payout\u00a0doesn&#8217;t\u00a0necessarily mean the product is simple before\u00a0expiration.\u00a0That&#8217;s\u00a0always important.\u00a0You&#8217;re\u00a0still\u00a0gonna\u00a0have pricing, probability, time, volatility, liquidity, and settlement mechanics to really understand here, so.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-2\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And a lot of our listeners may think that binary options are new, but the CBOE and the AMEX had versions of these before. Can you,\u00a0Mat, can you\u00a0give them a little bit of a history with these?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-2\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Sure.\u00a0Yeah. The\u00a0Cboe\u00a0first launched broad-based binaries in 2008 on index products, and the AMEX had something called fixed return options, or FROs.\u00a0Both of these\u00a0reflected an early attempt to really bring defined outcome binary stylistic contracts into the US options ecosystem. I was in the SPX at the\u00a0time\u00a0trading S&amp;P 500 options, so I remember that period pretty clearly as far as options were concerned.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The products existed, but they never really became a major part of the listed options ecosystem broadly. I\u00a0don&#8217;t\u00a0think that necessarily means the concept was flawed.\u00a0I think the market may not have been ready for it at the time.\u00a0In 2008, there were a lot of things that were different, right?\u00a0The retail user experience was completely different.\u00a0You\u00a0didn&#8217;t\u00a0have today&#8217;s app-based trading environment. The zero commission expectations were not there. API-driven access was different. Zero DTE option obviously\u00a0didn&#8217;t\u00a0exist at all yet, and the broader\u00a0prediction\u00a0market language that has become familiar to a lot of these people trading options\u00a0wasn&#8217;t\u00a0there.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So today, the audience is different, the technology is different, the way people discover and interact with markets is different.&nbsp;So&nbsp;this&nbsp;isn&#8217;t&nbsp;just a&nbsp;product&nbsp;relaunch story, right?&nbsp;It&#8217;s&nbsp;also a story about how much the&nbsp;options&nbsp;market and the retail investor base have changed since 2008.&nbsp;<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-3\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And\u00a0Mat, we should\u00a0probably take\u00a0a step back and\u00a0kind of give\u00a0a 10,000-foot overview because we kicked off the\u00a0conversation,\u00a0we&#8217;re\u00a0talking about binary options, how they&#8217;ve\u00a0kind of existed\u00a0before. But it\u00a0probably makes\u00a0sense to just\u00a0kind of let\u00a0the listener know, like, what exactly is a binary\u00a0option, in case\u00a0there&#8217;s\u00a0someone out there that may not be familiar with it?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-3\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah,\u00a0it&#8217;s\u00a0a good question and\u00a0a great place\u00a0to start. A binary\u00a0option\u00a0as you might imagine from its title, is\u00a0an option\u00a0with a fixed payout, like a one or a zero kind of vibe.\u00a0So\u00a0the fixed payout is based on whether a condition is met at\u00a0expiration. And in the products that\u00a0we&#8217;re\u00a0discussing here, the contract pays either a fixed\u00a0amount\u00a0or it pays zero.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So, for example, a binary call might pay 100&nbsp;bucks&nbsp;if the underlying finishes at or above the strike at&nbsp;expiration&nbsp;because&nbsp;it&#8217;s&nbsp;a call, right? And if it&nbsp;doesn&#8217;t&nbsp;finish above that strike, it would pay zero. And a binary put would have the exact mirror image of that P&amp;L graph. And&nbsp;so&nbsp;it would pay if the underlying finishes below the strike at&nbsp;expiration, but if it&nbsp;doesn&#8217;t, it would pay zero.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So\u00a0the\u00a0big difference\u00a0here from a standard call or a put is that the binary\u00a0doesn&#8217;t\u00a0reward\u00a0magnitude\u00a0of move beyond the condition being met. If the condition is met, the payout is fixed. If the condition is not met, the payout is zero.\u00a0So\u00a0a standard call, the one that you would trade right now before the binaries are being relisted, asks you kind of like how far above the strike did the underlying finish, whereas the binary call is really asking the question, did it finish above the strike, yes or no?\u00a0And\u00a0that&#8217;s\u00a0the big distinction between these two types of options.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-4\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah.\u00a0So\u00a0in other words, I own this binary call and\u00a0it&#8217;s\u00a0$10 in the\u00a0money,\u00a0I&#8217;m\u00a0still just getting a dollar.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-4\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Correct. Correct.\u00a0It&#8217;s\u00a0a one or a zero outcome, right?\u00a0That&#8217;s\u00a0why\u00a0it&#8217;s\u00a0called binary.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-5\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah. And if you could just maybe walk through an example just to kind of, just so we can really spell it out for our listeners.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-5\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Absolutely.\u00a0Let&#8217;s\u00a0give\u00a0a kind of a\u00a0simple\u00a0generic example.\u00a0Let&#8217;s\u00a0say we have an underlying trading near 600, and\u00a0there&#8217;s\u00a0a\u00a0600 strike\u00a0binary call that pays 100\u00a0bucks\u00a0if the underlying finishes at or above 600 at\u00a0expiration.\u00a0So\u00a0if that binary call is trading for 42\u00a0bucks, the buyer is paying 42 for the possibility of receiving 100 at settlement.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If the condition is met, the gross profit would be 58 before commissions, fees, and other costs, right? So\u00a0that&#8217;s\u00a0the 42\u00a0bucks\u00a0you paid for it that\u00a0you&#8217;ve\u00a0already paid for it, and the thing goes out worth 100.\u00a0So\u00a0for the seller,\u00a0it&#8217;s\u00a0the opposite of that. The seller collects the 42 bucks, but if the condition is met, the seller must pay the $100 settle amount, so the seller&#8217;s maximum gross gain is the premium collected, the amount that they sold it for, and the maximum gross loss is the difference between the full payout and the premium collected.\u00a0So\u00a0that&#8217;s\u00a0why these products can feel intuitive. The payout is really clearly\u00a0bounded, right? But bounded\u00a0doesn&#8217;t\u00a0mean risk-free, and intuitive\u00a0doesn&#8217;t\u00a0always mean easy. So that&#8217;s part of the\u00a0reason why\u00a0we&#8217;re\u00a0talking about it now.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-6\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And,\u00a0so is the\u00a0price like\u00a0basically the\u00a0delta then? If\u00a0it&#8217;s\u00a0trading at 42, is that really saying that\u00a0there&#8217;s\u00a0a 42% chance that this is\u00a0gonna\u00a0be in the money or is it a little bit more complicated than that?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-6\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah,\u00a0it&#8217;s\u00a0a good way\u00a0to look at it, and\u00a0it&#8217;s\u00a0a good way\u00a0to think about it. And\u00a0it&#8217;s\u00a0understandable to look at it that way, but\u00a0it&#8217;s\u00a0also not perfectly precise as far as\u00a0that&#8217;s\u00a0concerned because the contract pays either 100 or zero.\u00a0So\u00a0the price can look like\u00a0the implied\u00a0probability, right? At this point in time, if something is trading 42, like in that example we gave, you might look at it and say the market is saying it roughly has a 42% chance of happening, and that&#8217;s one way to look at it.\u00a0But\u00a0the real\u00a0market prices are not pure probabilities, right?\u00a0So\u00a0there&#8217;s\u00a0a lot built into that.\u00a0There&#8217;s\u00a0bid-ask spreads, liquidity, the\u00a0supply\u00a0and demand dynamic really\u00a0matters here, time to\u00a0expiration\u00a0matters, volatility\u00a0matters, market maker\u00a0positioning\u00a0and hedging costs can also\u00a0matter.\u00a0So\u00a0I would describe the price that\u00a0you&#8217;re\u00a0looking at as a market implied estimate, not a perfectly clean forecast like coming down from the heavens, right?\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It&#8217;s a tradable market price, but it&#8217;s not really a promise as to whether or not this thing is&nbsp;gonna&nbsp;pay out.&nbsp;<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-7\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So how, in that case then, like how should&#8211;\u00a0Yeah,\u00a0&#8217;cause\u00a0these are different, like you said, you come back to that $5 in the money is still only paying a dollar.\u00a0Like how\u00a0should investors compare a binary\u00a0option\u00a0to the regular call or put that they would be, that\u00a0they&#8217;re\u00a0used to trading now?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-7\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah,\u00a0it&#8217;s\u00a0good. And\u00a0I think that question\u00a0harkens back to what I said at the beginning. The easiest way is to separate direction from\u00a0magnitude, because a standard call or a put has its value tied to how far the underlying moves beyond the strike, or how far it might also move beyond the strike.\u00a0And if you own that call and the underlying keeps moving higher, the call can keep gaining intrinsic value all the way, right, to infinity.\u00a0That&#8217;s\u00a0the whole point of the open-ended part of the optionality. But the binary\u00a0option\u00a0is different.\u00a0It&#8217;s\u00a0focused on whether the condition is met. And\u00a0so\u00a0once that condition is met at\u00a0expiration,\u00a0payout&#8217;s\u00a0fixed.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So standard options are about direction plus\u00a0magnitude, and binary options are really about direction and a threshold being met. So that distinction\u00a0matters because a binary buyer can be right about direction but not\u00a0benefit\u00a0from the\u00a0additional\u00a0movement beyond the payout condition. Once the condition is met, the actual barrier of that payout\u2014it pays 100\u00a0bucks\u00a0or whatever that barrier is\u2014that is the payout.\u00a0It\u00a0doesn&#8217;t\u00a0pay more because the underlying continues to rally afterwards if\u00a0it&#8217;s\u00a0a call. So\u00a0that&#8217;s\u00a0important.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-8\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So\u00a0with the price and the dollar payout, these are sounding really pretty similar to\u00a0prediction\u00a0market contracts in a lot of ways. Is that a fair comparison or am I off mark here?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-8\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">No, I\u00a0don&#8217;t\u00a0think\u00a0you&#8217;re\u00a0off mark. I think\u00a0it&#8217;s\u00a0a fair comparison. Some of it is because of the environment that\u00a0we&#8217;re\u00a0in now, and because we have this larger based prediction market environment that people are starting to look at.\u00a0It&#8217;s\u00a0fair from a user experience standpoint as well, right? But we need to be careful with the structure here.\u00a0From the user&#8217;s perspective, the question can feel\u00a0very similar: will this market finish above this level, yes or no, right? But from a market structure standpoint, these are listed options. So that means\u00a0they&#8217;re\u00a0standardized contract terms,\u00a0they&#8217;re\u00a0exchange listed, they are OCC cleared, there are settlement rules, and option-style pricing dynamics are built into them.\u00a0And\u00a0so\u00a0part of the reason I&#8217;m talking about it also is because I think that OCC cleared piece really actually\u00a0matters in the listed options market. Options Clearing Corporation serves as the central counterparty, which means they become the buyer to every seller and the seller to every buyer.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That&#8217;s\u00a0a different framework than simply having two market participants meeting each other around some event-style contract.\u00a0So\u00a0the interface that people are\u00a0gonna\u00a0see may feel very prediction-like, but the product very squarely exists within the listed options framework. And that\u00a0matters for a lot of reasons, but from my perspective, it\u00a0matters because there needs to be\u00a0options\u00a0education around it.\u00a0We still have to talk about premium and time to expiration and volatility and settlement and the role of central clearing when we&#8217;re talking about these products.\u00a0They are centrally listed and cleared options.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-9\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, and that was a great response. And you\u00a0actually basically\u00a0just led me into my next question,\u00a0&#8217;cause\u00a0I was\u00a0gonna\u00a0ask about the Greeks and like, I was supposed to like, how does time affect binary options?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-9\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Oh\u00a0yeah.\u00a0It&#8217;s\u00a0an interesting thing\u00a0because\u00a0like I said, many people are used to trading very short-term options now because of the zero DTE phenomenon that\u00a0we&#8217;ve\u00a0been talking about forever, and time\u00a0matters for those options a lot. Time also\u00a0matters a lot for these binary options because a binary\u00a0option\u00a0close to\u00a0expiration\u00a0can move very quickly when the underlying is close to the strike.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You&#8217;re talking about whether or not the actual condition is going to be met, right?&nbsp;And if the payout is zero or 100,&nbsp;that&#8217;s&nbsp;a huge difference&nbsp;between that&nbsp;being above the strike or below the strike. And&nbsp;so&nbsp;if the underlying is sitting right around the binary strike with only a small amount of time left,&nbsp;a very small&nbsp;move can dramatically affect and change the market price of the binary.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That&#8217;s\u00a0because the contract is getting\u00a0very close\u00a0to its final state.\u00a0It&#8217;s\u00a0moving toward either the full payout of whatever that is or zero.\u00a0So\u00a0this is\u00a0similar to\u00a0what\u00a0we&#8217;re\u00a0already seeing in short-dated options. Risk, in that way, concentrates around strikes and around expirations very specifically, and\u00a0that&#8217;s\u00a0one of the most important educational points here, I think, is that binary options may be simple at their\u00a0expiration.\u00a0Like, when you look backward on them and say, &#8220;Was this condition met or was it not?&#8221;\u00a0That looks very simple in retrospect, but they can be really sensitive up to their expiration, especially if we are close to the strike and really close to that expiration.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-10\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So\u00a0what can binary options&#8230;\u00a0Let&#8217;s\u00a0start with the positive. What can they do well? Like, what are they good for? For lack\u00a0of a better word.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-10\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">War, what is it\u00a0good for? Absolutely nothing!<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-11\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah\u00a0exactly. You got me.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-12\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So, I mean, just to kind of recap binary options, I mean, fairly straightforward in a way, right?\u00a0Like if it&#8217;s, if you buy the 50 binary call and the stock closes at 50.01, $50 and 1 cent,\u00a0you&#8217;re\u00a0gonna\u00a0make that dollar. And if it closes at $49 and 99\u00a0cents\u00a0it&#8217;s\u00a0worth zero.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-11\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-13\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">There&#8217;s\u00a0a little twist, right? So not only are there single binary options, but\u00a0Cboe\u00a0is introducing quoted dollar-wide vertical spreads, right, alongside these binary options.\u00a0So\u00a0what are they about?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-12\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Correct.\u00a0Yeah.\u00a0So\u00a0at the same time as\u00a0Cboe\u00a0Global Markets, Inc. announced that they were relisting these binary options, they also said that they were going to quote in their COB book, I believe, all of the $1 wide vertical spreads around the at-the-money and around any of these $1 wide vertical spreads that would be relevant to the binary options.\u00a0I believe\u00a0it&#8217;s\u00a0on zero day and one day options, are\u00a0all of\u00a0those $1 call spreads and put spreads. And this might be the most interesting part of this whole launch, because a tight vertical spread can create a payoff structure that looks\u00a0very similar\u00a0to a binary outcome, right? If you think about it, the binary actual outcome looks an awful lot like a $1 call spread or a $1 put spread because\u00a0it&#8217;s\u00a0bounded at both sides and it has this, like, straight line in between them.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The only difference\u00a0is\u00a0a\u00a0tight vertical looks\u00a0similar to\u00a0that, but\u00a0has some curvature to it.\u00a0So\u00a0imagine that same underlying that we talked about trading 600. Think about the 600, 601 call spread. If the underlying finishes below 600, the call\u00a0spread&#8217;s\u00a0worth zero. If it finishes above 601, the call spread is worth its full value, which is a full dollar.\u00a0But if it finishes between 600 and 601, the spread has some amount of partial value, right?\u00a0It&#8217;s\u00a0like some amount of\u00a0the distance\u00a0between those two strikes. And so\u00a0that&#8217;s\u00a0the\u00a0big difference\u00a0between that and the binary. The binary&#8217;s all or nothing. The $1 call spreads have that small partial value\u00a0zone in\u00a0between the two strikes.\u00a0So\u00a0the binary is much cleaner from the payout structure, the fixed payout of zero or one. But the tight vertical spread is more like zero value, partial\u00a0value in\u00a0between the strikes, or full value if it settles above the strike for the call spreads or below the strike for the put spreads. And that makes them related, right, but not identical.\u00a0Interestingly, when we started in &#8217;08, when we started looking at these, our crude way to model them was to think about them like they were\u00a0call\u00a0spreads.\u00a0That&#8217;s\u00a0how we\u2014 that&#8217;s\u00a0kind of how\u00a0we modeled them and thought about them at the time.\u00a0So\u00a0it&#8217;s\u00a0interesting. When\u2014 that was the first thing that I realized when I read the announcement is like, &#8220;Oh, they&#8217;re listing all the $1 call spreads and put spreads, too. That&#8217;s interesting.&#8221; So\u00a0that&#8217;s\u00a0what&#8217;s\u00a0going on there, and\u00a0it&#8217;s\u00a0an interesting part of this for sure.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-14\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah,\u00a0it&#8217;s\u00a0almost like\u00a0a pseudo-synthetic binary\u00a0option.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-13\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Exactly. Exactly.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-15\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Or the binary\u00a0option&#8217;s\u00a0like a pseudo-synthetic dollar call spread.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-14\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Exactly.\u00a0Yeah, without the curvature in between, for sure.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-16\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">So\u00a0is comparing them useful then, between the two, even though\u00a0they&#8217;re\u00a0different?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-15\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, I think\u00a0it&#8217;s\u00a0useful. It really connects the new&#8230; I mean, I\u2014 people are calling this a new product.\u00a0It&#8217;s\u00a0not necessarily a new product, right?\u00a0It connects it to something that option traders already kind of intuitively understand.\u00a0If someone understands vertical spreads, then a binary\u00a0option\u00a0can be explained as a little bit more of a direct outcome-based structure that looks\u00a0very similar\u00a0but has more of a straight line in between the two payouts, right?\u00a0And\u00a0so\u00a0if someone understands the binary payout very well, then you can also tie that to the tight vertical call spread and help them understand the actual listed options that exist already. If they\u00a0started\u00a0on the binary side and they\u00a0wanna\u00a0learn more about the listed stuff, then\u00a0that&#8217;s\u00a0interesting, too.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And from my perspective, it creates this interesting educational bridge between the two where I can help people who understand one to understand the other and vice versa, right? And&nbsp;so&nbsp;I think it&nbsp;also helps investors avoid thinking of binaries as&nbsp;completely separate&nbsp;from options, which I think is important, especially here, because these are part of the options ecosystem, right? They isolate the outcome more directly, but they&#8217;re still&nbsp;listed&nbsp;options, and they have all of the, all of the pieces that listed options usually have.&nbsp;<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-17\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And we just brought out a whole lot of\u00a0information\u00a0and both of us are in the education field.\u00a0So\u00a0I think\u00a0I&#8217;m\u00a0gonna\u00a0take a step here and just kind of&#8230;\u00a0Let&#8217;s\u00a0just, if you could just point out like what investors, the main risk points that they should really understand about these before they make that decision\u00a0whether or not\u00a0to trade or not to trade. But yeah, yeah, but if you just kind of maybe spell it out for them and like, yeah,\u00a0&#8217;cause\u00a0we did cover a bunch of stuff here and sometimes it&#8217;s just really helpful to\u00a0kind of sort\u00a0of just bullet point it basically and point out.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-16\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah, for sure.\u00a0Let&#8217;s\u00a0bullet point this down\u00a0&#8217;cause\u00a0there&#8217;s\u00a0a lot there. First, I think just because\u00a0it&#8217;s\u00a0defined risk\u00a0doesn&#8217;t\u00a0mean\u00a0it&#8217;s\u00a0low risk, right? And I talk about that when I talk about defined risk ETFs, right?\u00a0It&#8217;s\u00a0defined, but it\u00a0doesn&#8217;t\u00a0mean\u00a0there&#8217;s\u00a0no risk. It just means the maximum loss you can know in advance, right?\u00a0The maximum loss or the maximum gain you can know in advance.\u00a0Second, price is not the same thing necessarily as probability. It may reflect the probability of this happening, but it also reflects some of the other market forces that are out there, namely supply and demand and\u00a0volatility\u00a0and all of those things.\u00a0Third, in this case, being right directionally is not going to necessarily be enough. Now, oftentimes when we talk about options, we talk about that also, right?\u00a0There&#8217;s\u00a0all kinds of other things going on here. There&#8217;s time to\u00a0expiration, there&#8217;s volatility expectations. Those things can change.\u00a0But in this case, it&#8217;s particularly important the settlement condition has to be met at expiration for these to actually pay out or for it to be zero.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And then fourth, the short-dated contracts can reprice very quickly, just like zero DTE options, especially when&nbsp;you&#8217;re&nbsp;close to the strike.&nbsp;That&#8217;s&nbsp;something you need to keep in mind, especially if you have a lot of experience trading zero DTE stuff. This stuff is&nbsp;gonna&nbsp;map pretty cleanly to your expectations of time and volatility, but it just has a very, for lack of a better term, it has a very binary payout, right? And&nbsp;so&nbsp;investors need to really understand the full payout before they trade.&nbsp;<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">What can I&nbsp;make? What can I lose? What&#8217;s the exact condition that&nbsp;has&nbsp;to be met? And when are we measuring that condition?&nbsp;Like, when&nbsp;does this thing expire?&nbsp;When do we figure out whether or not this thing met the condition?&nbsp;If you&nbsp;can&#8217;t&nbsp;answer those questions, you&nbsp;probably shouldn&#8217;t&nbsp;be jumping in with both feet and trading the product just&nbsp;yet,&nbsp;right? So&nbsp;that&#8217;s&nbsp;the distillation of those things to me, I think.&nbsp;<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-18\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">And earlier in the podcast,\u00a0Mat, you mentioned back in 2008 when you were in the\u00a0pit,\u00a0these things were announced. Does it feel different today?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-17\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah. It feels a lot different for a lot of\u00a0different reasons.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-19\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah. Besides the fact that\u00a0we&#8217;re all\u00a0almost 20 years older.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-18\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">I&#8217;m\u00a0a lot older.\u00a0I&#8217;m\u00a0not standing, like, two feet away spitting on someone while\u00a0I&#8217;m\u00a0screaming\u00a0out loud\u00a0at markets. Yes, things feel different for many\u00a0different reasons, those two being one of them. But it also feels different, I think, because the customer base is so much different now. In &#8217;08 options were certainly already a very\u00a0mature marketplace, or they were on the way to being a very\u00a0mature marketplace.\u00a0But the retail experience was not\u00a0nearly what\u00a0it is today. The average retail investor\u00a0didn&#8217;t\u00a0have many of the same tools, the same mobile access, the same familiarity with zero DTE, or the same comfort with outcome-based products that they are\u00a0acquiring\u00a0as we speak. And so today, I think\u00a0there&#8217;s\u00a0a lot of investors that are thinking in much shorter\u00a0timeframes\u00a0than they used to back then.\u00a0Partially because\u00a0there&#8217;s\u00a0just way more ways to express a shorter\u00a0timeframe\u00a0opinion based on how short-dated the options are, and they already look at option chains and probabilities and expected moves and defined risk trades. And\u00a0so\u00a0the concept of these, I think, is going to land a lot differently now than it did back then.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">But I also think that&nbsp;the education&nbsp;for these has to be better now, too.&nbsp;It&#8217;s&nbsp;the&nbsp;product&nbsp;is easier to understand at the surface, but that can be&nbsp;a very good&nbsp;thing, but it can also create overconfidence in people that&nbsp;don&#8217;t&nbsp;necessarily understand what&nbsp;they&#8217;re&nbsp;doing.&nbsp;So&nbsp;the job of education is to slow people down just enough to understand what the structure means before they trade it.&nbsp;<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-20\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Mat, this has been great, but before you leave\u00a0us\u00a0what&#8217;s\u00a0the big takeaway?\u00a0Kind of sum\u00a0it all up. What is the big takeaway with binary options?\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-19\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yeah.\u00a0So\u00a0the big takeaways here, and\u00a0there&#8217;s\u00a0a few of them. The big takeaway at number one, I think, is that binary options may look simple at\u00a0expiration, but\u00a0they&#8217;re\u00a0not necessarily simple right up until\u00a0expiration.\u00a0They ask a really clean question.\u00a0That is, does the underlying finish above or below a specific level?\u00a0But the price of that question is still\u00a0determined\u00a0by a market that has bids and offers, and it has supply and demand dynamics just like anything else. That means probability, time, volatility, liquidity, settlement, and clearing all still\u00a0matter, right?\u00a0It&#8217;s\u00a0all part of the market.\u00a0So\u00a0I\u00a0wouldn&#8217;t\u00a0think about binary options as replacing standard options.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">They&#8217;re\u00a0not\u00a0gonna\u00a0do that. I\u00a0wouldn&#8217;t\u00a0think about them as anything other than another risk expression tool because that&#8217;s\u00a0kind of what\u00a0they are and what they were really intended to be originally. And\u00a0so\u00a0we&#8217;ve just\u00a0kind of come\u00a0full circle back to this, but\u00a0we&#8217;re\u00a0in a different market environment where they might land differently.\u00a0So standard calls and puts,\u00a0remember,\u00a0they have direction and\u00a0magnitude. Vertical spreads define risk and reward across that range of prices\u00a0from like that\u00a0zero to one, and the binary options isolate those specific outcomes.\u00a0So\u00a0these are different tools,\u00a0they&#8217;re\u00a0different structures,\u00a0they&#8217;re\u00a0different risks.\u00a0<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And&nbsp;so&nbsp;the closing question for anybody might be: what am I paying for this, how much can I make, and how much can I lose? And what&nbsp;has to&nbsp;happen by&nbsp;expiration&nbsp;for this trade to work and\/or not work? And I&nbsp;think&nbsp;those questions you can ask yourself regardless of the structure that&nbsp;you&#8217;re&nbsp;looking at.&nbsp;<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-21\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Yes. True\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-20\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">I think if you can ask those cleanly and have clear answers to them, I think\u00a0you&#8217;re\u00a0starting from the right place with these options.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-22\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Oh,\u00a0Mat, this has been great as always. You can find more from\u00a0Mat\u00a0at theocc.com and again, on our website as\u00a0well\u00a0under education.\u00a0Actually\u00a0really great podcast,\u00a0Mat. Love having\u00a0you in\u00a0here. I always learn something, even though\u00a0I&#8217;ve\u00a0been in\u00a0the business\u00a0for quite a while, but I still always find myself learning something every time we get together and talk shop.\u00a0So\u00a0thanks again.\u00a0<\/p>\n\n\n\n<h3 id=\"h-mat-cashman-21\" class=\"wp-block-heading\">Mat\u00a0Cashman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Right on.\u00a0Thanks\u00a0for having me.\u00a0<\/p>\n\n\n\n<h3 id=\"h-jeff-praissman-23\" class=\"wp-block-heading\">Jeff Praissman<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">All right.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Binary options are making a comeback, but how do they actually work and how do they compare to traditional options trading? In this episode, Matt Cashman from the OCC breaks down binary options, fixed payouts, implied probabilities, risk management, and why these outcome-based products are attracting renewed interest in today&#8217;s markets.<\/p>\n","protected":false},"author":914,"featured_media":244530,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[10842,13857],"tags":[14954,20613,6381,320,18827,18480,21731,2099,18761,20436,12030,21733,16071,10847,12397,4574,21732,19455,20206,6382,20718,4135,18237,14728,18242,3601,19606],"contributors-categories":[13576,13771],"class_list":["post-244519","post","type-post","status-publish","format-standard","has-post-thumbnail","category-ibkr-podcasts","category-podcasts","tag-0dte-options","tag-binary-options","tag-call-spreads","tag-cboe","tag-derivatives-trading","tag-finance-podcast","tag-fixed-payout-options","tag-interactive-brokers","tag-investing-podcast","tag-market-structure","tag-occ","tag-options-clearing-corporation","tag-options-education","tag-options-market","tag-options-strategies","tag-options-trading","tag-outcome-based-trading","tag-prediction-markets","tag-probability-trading","tag-put-spreads","tag-retail-investing","tag-risk-management","tag-stock-market-education","tag-trading-education","tag-trading-psychology","tag-vertical-spreads","tag-zero-dte","contributors-categories-interactive-brokers","contributors-categories-occ"],"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast SEO v28.0) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>So, Two Outcomes Walk Into a Market.. | IBKR Podcasts<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.interactivebrokers.com\/campus\/wp-json\/wp\/v2\/posts\/244519\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"So, Two Outcomes Walk Into a Market.. | IBKR Campus US\" \/>\n<meta property=\"og:description\" content=\"Binary options are making a comeback, but how do they actually work and how do they compare to traditional options trading? In this episode, Matt Cashman from the OCC breaks down binary options, fixed payouts, implied probabilities, risk management, and why these outcome-based products are attracting renewed interest in today&#039;s markets.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.interactivebrokers.com\/campus\/podcasts\/ibkr-podcasts\/so-two-outcomes-walk-into-a-market\/\" \/>\n<meta property=\"og:site_name\" content=\"IBKR Campus US\" \/>\n<meta property=\"article:published_time\" content=\"2026-06-18T15:21:19+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-06-18T15:21:23+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2026\/06\/pod20260608occ_coverimage.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"563\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Jeff Praissman\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Jeff Praissman\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"21 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\n\t    \"@context\": \"https:\\\/\\\/schema.org\",\n\t    \"@graph\": [\n\t        {\n\t            \"@type\": \"NewsArticle\",\n\t            \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/podcasts\\\/ibkr-podcasts\\\/so-two-outcomes-walk-into-a-market\\\/#article\",\n\t            \"isPartOf\": {\n\t                \"@id\": \"https:\\\/\\\/ibkrcampus.com\\\/campus\\\/podcasts\\\/ibkr-podcasts\\\/so-two-outcomes-walk-into-a-market\\\/\"\n\t            },\n\t            \"author\": {\n\t                \"name\": \"Jeff Praissman\",\n\t                \"@id\": 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