Cboe Launches Russell 2000 Prediction Markets

Cboe Global Markets, Inc. (Cboe: CBOE) announced today that it expanded its prediction market offerings to include mini-Russell 2000 Index (MRUT) binary options.

The mini-Russell 2000 options are linked to the Russell 2000 Index, which is one of the most widely observed small-cap equity benchmarks in the world. The new yes/no derivatives are one-tenth the size of traditional Russell 2000 Index options, meaning the notional value of the mini options is $28,600 compared to approximately $281,200 for full-sized Russell 2000 Index derivatives. Cboe’s new derivatives pay $100 or nothing depending on where the MRUT settles at, above or below a specific price point.

Cboe’s prediction markets suite already included binary options on the large-cap S&P 500, which is the most tracked gauge of domestic stocks.

Russell 2000 Prediction Markets Could Be Hits

The new yes/no derivatives on the mini-Russell 2000 Index could prove popular with traders, including retail market participants, and for multiple reasons at that. First, the Russell 2000 is widely known among a broad swath of investors as highlighted by the fact that the two largest exchange traded funds (ETFs) tracking the index hold more than $92 billion in combined assets under management.

Second, plenty of risk-tolerant retail traders are embracing short-term derivatives, including timed event contracts, indicating there may be a solid runway of adoption for the fresh Cboe options.

“The Russell 2000 Index is traditionally more volatile than other broad measures, which is part of why demand for zero-days-to-expiry options tied to the index has grown significantly in recent years,” said JJ Kinahan, head of retail expansion and alternative investment products at Cboe, in the statement.

Cboe Extending Prediction Market Push

The debut of the mini-Russell 2000 Index binary options is the latest sign of Cboe expanding its prediction market reach — one that isn’t dependent on the sports event contracts that are in the crosshairs of politicians and state gaming regulators.

Confirming it sees long-term potential at the intersection of traditional financial markets and prediction markets, Cboe recently launched key performance indicator (KPI) event contracts tied to select public companies. Those derivatives trade on Robinhood, providing traders with avenues for “betting” on much more than just a company’s earnings reports.