Charles Schwab to Launch S&P 500 Prediction Markets with Cboe

Charles Schwab is partnering with Cboe Global Markets to launch binary options contracts that allow customers to make yes-or-no wagers on the S&P 500, according to a Wall Street Journal report. This initiative represents the brokerage’s first entry into prediction markets and is expected to roll out to customers in the coming months, the Journal reported, citing people familiar with the matter.

How do Schwab’s prediction markets differ from other platforms?

The proposed product functions as a binary option rather than a futures-style contract. According to the Wall Street Journal, the contract will pay a fixed cash amount or expire worthless based on whether the S&P 500 closes above or below a specific target price.

This structure differs from traditional prediction market platforms like Kalshi and Polymarket. Those platforms typically utilize futures-style contracts tied to event outcomes, whereas Schwab’s approach focuses on a fixed-outcome binary result.

Did You Know? Unlike futures-style contracts found on platforms like Polymarket, Schwab’s new product would pay a fixed cash amount or expire entirely worthless depending on the S&P 500’s closing price.

What is the “Plus Zone” feature?

Schwab and Cboe are currently in talks to integrate a Cboe feature called the “Plus Zone.” This mechanism would allow traders to receive a partial payout if their prediction is close to the final outcome, even if the index does not hit the exact target level.

Expert Insight: Samantha Carter notes that by moving into prediction markets, Schwab is diversifying how retail clients interact with market volatility. The potential “Plus Zone” feature could mitigate the “all-or-nothing” risk inherent in binary options, potentially making these instruments more attractive to cautious traders.

What happens next for Schwab customers?

The feature may become available to Schwab users within the next few months. A possible next step could include the formalization of the “Plus Zone” agreement with Cboe to provide more flexible payout structures.

Frequently Asked Questions

What is Charles Schwab launching with Cboe Global Markets?

Schwab is working to launch a new type of options contract that allows customers to make yes-or-no wagers on the performance of the S&P 500.

How to Invest in S&P 500 in Charles Schwab: A Step-by-Step Tutorial for Beginners

How does this product differ from platforms like Polymarket and Kalshi?

While Polymarket and Kalshi typically offer futures-style contracts, Schwab’s product would function as a binary option with a fixed cash payout or a total loss of value.

What is the purpose of the “Plus Zone” feature?

The “Plus Zone” would potentially allow traders to receive a partial payout when their prediction is close to the final outcome, even if the target level is not exactly met.

Would you prefer a fixed-payout binary option or a futures-style contract when speculating on market indices?