Yo + binding off

I’m currently knitting Naughty Needle’s “straighjacket” sweater, and I’ve come to the end of the first sleeve where it states the following:

BO 3 sts. *Yo, draw through live st (binding it off), repeat from *7 more times, drop next 2 sts, BO to end.

Ok so I get the binding off 3 sts part. The yarn over part with the live st-not so much. Please help!

Cast off the 3,* then do a yo on the right needle. Do exactly what you would if that yo was a knitted stitch: you pick up the first stitch (not the yo, the stitch you knitted before that one) and pass it over and drop it off the needle. Repeat from * 7 more times.

That’s how I read it.

Ditto Redwitch’s comment, I think. Is this down where the cuff part starts?