Schwab launches S&P 500 binary options with Cboe, enters prediction markets
In brief
- Schwab and Cboe develop binary options contracts tied to S&P 500 index performance
- Rollout to Schwab customers expected in coming months
- Binary options focus on financial benchmarks, differentiating from political and sports prediction markets
- Coinbase and Robinhood already offer prediction market products
How the product works
Schwab's product would function as a binary option, paying a fixed cash amount or expiring worthless depending on whether the S&P 500 closes above or below a specified target price. The pair are also in talks to offer a variant tied to a Cboe feature known as the "Plus Zone," which would allow traders to receive a partial payout when their prediction is close to the final outcome.
The feature is expected to roll out to Schwab customers in the coming months. Schwab and Cboe have discussed expanding the lineup beyond the S&P 500 to other market indexes or financial benchmarks as demand grows.
A focused strategy
Schwab's approach differs from competitors. The brokerage plans to focus on events with objectively verifiable outcomes in financial markets rather than contracts tied to politics, sports or other real-world events. That's a deliberate choice as platforms like Kalshi and Polymarket have attracted growing interest from traders seeking to speculate on elections and economic data releases.
Coinbase and Robinhood have both recently introduced prediction market offerings, signaling institutional appetite for the sector. Unlike traditional prediction market platforms such as Polymarket and Kalshi, which typically offer futures-style contracts tied to the outcome of events, Schwab's binary structure provides a simpler entry point for retail traders seeking defined-risk exposure to market moves.
