NEW YORK--Nasdaq OMX Group Inc. (NDAQ) plans to introduce a new class of option contracts on U.S. Treasury bonds by the end of the year, pending regulatory approval, the exchange operator was set to announce Thursday.

The new options, expected to launch in the fourth quarter if the Securities and Exchange Commission signs off, would allow investors to wager on the movement in 10-year and 30-year Treasurys. The contracts would make Nasdaq the only U.S. exchange operator offering options tied to U.S. government bonds.

"This is designed to be an affordable and focused product for "retail" investors to get involved in the Treasury space," said Eric Noll, Nasdaq OMX's head of transaction services. "Traders would be able to use this product in the same way as with equities."

Nasdaq OMX said it aims to structure the contracts to allow individual investors access to investing and hedging opportunities on Treasurys similar to those available with options on stocks.

The product would have a value of $10,000 per contract, according to the filing, and would be directly linked to either the most recently issued 10-year or 30-year benchmark Treasurys. The most recently issued Treasurys would be used because they are the most liquid in the bond market, Mr. Noll said. Option contracts would be offered with strike values in 50-cent increments.

Traders can currently use options to bet on exchange-traded funds tied to bonds. These funds, such as the iShares Barclays 20+ Year Treasury Bond Fund (TLT) and ProShares UltraShort Lehman 20+ Year Treasury Fund (TBT), are tied to baskets of Treasury bonds, and exercising option contracts on such funds involves shares of the ETFs. The proposed Nasdaq options would allow more targeted betting on a specific bond, rather than the movement in a basket of varying maturities.

If a trader exercised Nasdaq's proposed options on Treasurys, it would entail the right to buy or sell the underlying Treasury bonds themselves, with each contract consisting of 10 bonds with a face value of $1,000 each. For an investor that incorporates Treasurys in an investment portfolio, the options could be used in various hedging or income generating strategies.

Over the past month, TBT and TLT--the two most actively traded Treasury funds in the options market--averaged a combined 110,000 option contracts traded daily.

Approval for a Treasury-based option product isn't unprecedented. According to Nasdaq's filing with the SEC, the Chicago Board Option Exchange Holdings Inc. (CBOE) and NYSE Euronext's (NYX) Amex received approval to list and trade options tied to Treasurys in 1981. Neither exchange currently offers such products.

CBOE and NYSE did not immediately respond to requests for comment.

Write to Kaitlyn Kiernan at kaitlyn.kiernan@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires