BOSTON (MarketWatch) — Chicago Board Options Exchange and HedgeStreet Inc. said Wednesday that they’ve formed a strategic alliance to develop new products and increase the visibility and liquidity of HedgeStreet’s so-called hedgelets, which allow small investors to trade futures contracts.
San Mateo, Calif.-based HedgeStreet, launched in 2004, offers low-cost futures contracts on commodities like gold and energy, as well as on broad economic indicators and regional housing markets.
“We are a young market and we need time to build liquidity, and we think this alliance will do that,” said HedgeStreet spokeswoman Ursula Burger, adding that CBOE has “vast educational and research assets.”
HedgeStreet allows investors to trade binary options, with contracts priced for as little as $10, based on whether an indicator will hit a certain level, or that an event will happen. Read more.
The firm also offers hedgelets based on the price of an underlying commodity, index or event, with a variable payout ranging from zero to $50 depending on the movement of the underlying asset.
All transactions are settled in cash, and the company is regulated by the Commodity Futures Trading Commission.
Last year, HedgeStreet introduced hedgelets that allow investors to hedge the movement of median home prices in cities such as Chicago and New York. See related story.
HedgeStreet says that its goal is to allow individual investors to trade futures contracts, traditionally the domain of large sophisticated investors, in bite-sized pieces.
In a statement Wednesday, the firms announced that the deal also involves an equity investment in HedgeStreet by CBOE. HedgeStreet’s Burger declined to comment on the specific amount, but said that it’s in the “seven figures.”
View more information: https://www.marketwatch.com/story/cboe-hedgestreet-team-up-on-hedgelets