The Debut of FROs

I got an email yesterday from the American Stock Exchange that I wanted to pass along:

AMERICAN STOCK EXCHANGE ANNOUNCES LAUNCH OF FIXED RETURN OPTIONS (FROs) ON THURSDAY MAY 8, 2008

New York , May 1, 2008 – The American Stock Exchange® (Amex®) announced today the launch of Fixed Return Options^SM (FROs^SM), which will begin trading on May 8. FROs are “binary” options on popular equities and exchange traded funds (ETFs), including QQQQ, SPDRs and Google (GOOG) that will pay a fixed, cash amount of $100.00 upon settlement “in-the-money.”

Fixed Return Options are offered in two forms: “Finish High” – each long contract returns $100.00 if the underlying security settlement value is above the strike price at expiration and “Finish Low” – each long contract returns $100.00 if the underlying security settlement value is below the strike price at expiration.

FROs will settle at expiration based on Amex. FRO Settlement Index that will be published every 15 seconds over Tape B. Amex FRO Settlement Index is a weighted average of trading in the underlying on expiration day.

This is an interesting development and while some of you probably knew about this before, I guess I must have missed it. More and more though, the stock market is becoming a gambling machine, but I really do like this. Will be watching it more carefully.

Some stocks you can start trading FROs on are:

Comments

[nScout]

Who will guarantee the payments under these contracts?

[Eric Fox]

Ben at the Federal Reserve - who else? Hah! Hah!