Essentials 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 Essentials flashcards as text
If a binary option offers an 80% payout, what does a winning $100 trade return in total?
Answer: $180 (stake plus $80 profit)
A winning trade returns the original $100 stake plus the 80% payout of $80, totaling $180.
What is a key risk that makes binary options controversial?
Answer: The negative expected value due to payouts below 100%
Because winning payouts are under 100% while losses are the full stake, the long-term expected value is negative.
A 'one-touch' binary option pays out if the price does what before expiry?
Answer: Touches a specified target level at least once
A one-touch option wins if the underlying reaches the target price at any point before expiry.
What does a 'put' binary option profit from?
Answer: The price finishing below the strike
A binary put pays out when the underlying finishes below the strike at expiry.
Which regulator banned the sale of binary options to retail clients in the EU?
Answer: ESMA
ESMA prohibited the marketing and sale of binary options to retail investors in the EU.
On regulated U.S. exchanges, binary options are typically priced between what range?
Answer: $0 and $100
Exchange-traded binaries in the U.S. trade between $0 and $100, settling at one of those values.
What does the bid price of an exchange-traded binary roughly represent?
Answer: The market's implied probability of the event occurring
A binary's price reflects the market's perceived probability that it will finish in-the-money.