Binary Options Types and Structures Flashcards
7 cards from real Binary Trading practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Binary Options Types and Structures flashcards as text
What typically happens when a binary option expires 'At the Money' (ATM)?
Answer: The asset price equals the strike price exactly, usually resulting in a push or loss
At the Money occurs when the asset price equals exactly the strike price at expiry; most brokers treat this as a loss or return the original investment with zero profit.
What is a 'No Touch' binary option?
Answer: An option that pays out if the asset price never touches a specified level before expiry
A No Touch binary option pays out if the asset price never reaches the specified target level at any point throughout the entire duration of the trade until expiry.
What is the typical expiry timeframe available for 'long-term' binary options?
Answer: Days, weeks, or months into the future
Long-term binary options typically offer expiry periods ranging from several days to weeks or even months, suitable for traders analyzing longer-term market trends.
How does a 'Spread' or 'Tunnel' binary option determine a winning outcome?
Answer: The trade profits if the asset price remains within a defined price tunnel at expiry
A Spread (Tunnel) binary option pays out if the asset price remains within a defined upper and lower price boundary — the 'tunnel' — at the time of expiry.
What is a 'Fixed Return Option' (FRO)?
Answer: Another name for binary options, emphasizing that returns are predetermined and fixed
Fixed Return Option (FRO) is an alternative name for binary options, highlighting their defining characteristic: the profit or loss amount is fixed and fully known before the trade is placed.
Which binary option type is most suitable for capitalizing on high-volatility news events with uncertain direction?
Answer: Out-of-Range boundary options predicting a breakout
During high-volatility news events, an Out-of-Range boundary option benefits from the expected large price movement in either direction, without needing to predict which way price will break.
What is the key difference between a 'European-style' and 'American-style' binary option?
Answer: European options can only be exercised at expiry; American options can be settled at any time before expiry
European-style binary options can only be settled at the exact expiry time, while American-style binary options allow early exit or settlement at any point before the expiry.