Options tend to mystify many small individual investors but a new product launched this week could just change that.
That new product is called Fixed Returns Options also known as FROs, explains Don Montanero, Chief Executive of Trade King on CNBC's "Closing Bell.". They were launched Thursday on the American Stock Exchange and come in two forms, finish highs and finish lows with $100 pay-offs if you’re right.
How do they work?
For example Apple is trading around $183 right now (Friday May 9th) If you want to make a prediction that AAPL is going to trade below $175 you can buy the “finish low” option. Or you can make a bet to the upside.
One note of caution, adds Jon Najarian. Remember these are “binary options.” In other words they are an all or nothing bet. If you’re wrong you lose everything.
For more information go to Amex.com and click on “Fixed Return Options” in the Spotlight section.
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Trader disclosure: On May 9, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders: Adami Owns (C), (GS), (INTC), (MSFT), (AGU), (BTU), (NUE); Najarian Owns (AAPL), (BKC), (TSO), (XLF); Najarian Owns (AA) Calls, (BID) Calls, (BUD) Calls, (C) Calls, (MSFT) Calls, (YHOO) Calls; Macke Owns (ATVI), (MSFT), (INTC); Finerman Owns (GS); Finerman's Firm And Finerman Own (KALU), (HD); Finerman's Firm Owns SPX Index Puts; Finerman's Firm And Finerman Own (C) And (C) Leaps; Finerman's Firm Owns (MSFT), (TSO), (VLO), (PLCE); Finerman's Firm Owns (YHOO) And (YHOO) Call Spreads; Finerman's Firm Is Short (IYR), (IJR), (MDY), (IWM), (SPY); WWE Programs Air On Networks Of NBC Universal, The Parent Company Of CNBC