Charles Schwab (NYSE:SCHW) is teaming up with Cboe Global Markets to introduce a new suite of options contracts tied to the performance of the S&P 500 index. These products will let clients place straightforward yes-or-no wagers on whether the benchmark closes above or below predetermined levels, marking the brokerage’s entry into event-driven trading tools that resemble prediction markets.
The contracts are structured as binary options. In the standard version, traders receive a fixed cash payout if their prediction proves correct at expiration and nothing if it does not.
This all-or-nothing design delivers clearly defined risk and reward, appealing to investors seeking simple directional exposure to major market moves without the complexities of traditional options pricing or unlimited loss potential.
In addition to the fixed-payout contracts, Schwab plans to offer a related product that incorporates Cboe’s “plus zone” mechanism.
This feature provides scaled, partial payouts when a trader’s directional forecast is largely accurate, even if the index does not land precisely at the target level.
The plus-zone approach softens the binary outcome, offering a middle ground between full success and complete loss for near-miss scenarios.
These offerings are expected to become available to Schwab customers in the coming months.
Initial focus will remain on objectively verifiable financial benchmarks such as S&P 500 closing levels rather than non-market events.
The products will settle in cash and operate within the established regulatory framework for listed options.
The move comes amid rising interest in prediction-style contracts across the brokerage industry.
Platforms such as Robinhood and Interactive Brokers have already introduced similar event-based tools, allowing retail investors to engage with specific outcomes in a structured way.
Cboe has been exploring ways to revive and modernize binary-style products to meet this demand while keeping offerings anchored in traditional financial markets.
Schwab’s chief executive, Rick Wurster, has previously voiced caution about products that could blur the line between investing and gambling.
He has indicated a preference for offerings linked to market data over those involving sports, politics, or entertainment.
As first reported by the WSJ, the current partnership aligns with that stance by emphasizing regulated, index-based contracts that fit within Schwab’s core brokerage services.
For investors, these contracts could serve multiple purposes.
They provide a straightforward method to express views on near-term market direction with limited capital at risk.
They may also appeal to those looking for hedging tools or educational entry points into more advanced derivatives trading.
Because payouts are capped and known in advance, the products carry transparent risk parameters compared with standard equity or index options.
The collaboration highlights a broader trend in which established financial institutions are adapting to compete with newer prediction market platforms.
By partnering with Cboe, Schwab gains access to exchange-listed products that benefit from centralized clearing, regulatory oversight, and familiar trading infrastructure.
Industry professionals note that such offerings could attract a wider audience to options trading by simplifying mechanics while preserving the excitement of event-specific outcomes.
As these contracts roll out, they are likely to generate discussion about how traditional brokerages balance responsible innovation with their longstanding emphasis on long-term investing principles. The initiative represents a measured step by one of the largest U.S. brokerages into the evolving space of event contracts, offering clients new ways to engage with market movements through clearly defined, exchange-traded instruments.