FAQ’s

Binary Options Frequently Asked Questions

What are binary options?

Binary options are an easy and simplified way of trading financial markets. Payouts are easy to understand, you either win or lose. Binary options are offered in many different places and are a growing on line industry.

What is the strike price?

The strike price is the agreed upon level at which your options must close above or below, depending on whether you bought a call or a put. In some cases, such as one touch options, the price must only touch the strike price once in a given period in order to trigger a pay out.

What are one touch options?

One touch options are a newer way for binary traders to speculate financial markets. With one touch, the price of the underlying asset must touch the agreed upon strike price only one time in a given period in order to trigger a pay out. One touch options usually pay a larger return than standard binary options but also come with increased risk. One touch is not offered by all binary platforms but are gaining wider acceptance in the industry.

What Is The Expiration For Binary Options?

Unlike standard, index or currency options binary options have many different expiration types. This can range from 60 seconds to end of the month and vary from broker to broker. Unless your broker offers some form of “early out” option you will have to hold your binaries all the way until expiration. At that time if your option is in the money you will receive the maximum return as listed at purchase.

What Are Early Out Binary Options

Binary options generally have two potential outcomes; your options close out of the money and you lose all (or a percent, this depends on the broker)or your options close in the money and you win the maximum return. Early out options allow traders to close binary options trades before expiration. If the option is OTM you will receive less than the original purchase price but more than $0. If the option is ITM then you will receive a profit but not as much as the return if held until expiration.

How Much Do Binary Options Cost?

One benefit of binary options trading is that you choose how much or how little you trade, unlike standard options which are priced according to the Black-Scholes Model and affected by market volatility.Each time you buy a binary option position you will be prompted to enter an amount. Each platform has rules for minimum and maximum trade sizes.

What Is The Option Builder Tool?

The option builder tool is a new feature being offered by many of today’s binary options brokers. The tool is available through the SpotOption platform, a white label binary options platform that powers about 80% of all binary options brokers. The options builder allows traders to define their own binary trades by picking their own expiry time and risk/reward ratio. This differs from standard binary trading in that standard binary options come with set expiry’s and risk/reward profiles. The tool is supposed to allow traders more flexibility and better capital preservation. In my opinion the tool is not all that it is cracked up to be for two reasons. First, the expiration times are limited by the broker, usually a few hours to one day. Second, if I only want to risk $50 then all I have to do is trade $50.

What are regulated binary options?

Regulated binary options are binary option brokers, platforms or exchanges that are registered with a supervisory agency. In Europe CySEC is the primary regulatory body. For U.S. traders binary options brokers and exchanges must be registered with the CFTC and the SEC.

Does NADEX have 60 second options?

NADEX does not have 60 second options. NADEX expiries include intraday, end of day and end of week. 60 second options are typical of European CySEC binary options and are not available in the U.S. except with brokers still accepting U.S. traders.

What Is IG Markets?

IG Markets is the UK based parent company of NADEX. IG Markets operates in the UK, Europe and Australia offering spot forex CFD instruments. These derivative trading vehicles are cash settled and pay based on the spot price of the underlying asset. IG Markets trading options are a good way to get into international markets but come with increased risk and complicated trading. The complex nature of IG Market options and the elevated risk are one reason why European CySEC style binary options are growing in popularity.

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