Facts 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 Facts flashcards as text
What is the maximum loss a trader can incur on a single standard binary option position?
Answer: The full premium paid
A binary option's downside is capped at the premium (stake) paid to enter the trade.
A binary option that expires 'in the money' typically pays out which of the following?
Answer: A fixed predetermined amount
Binary options have a fixed, all-or-nothing payout regardless of how far in the money they finish.
In the United States, which regulator oversees legally traded binary options on designated exchanges?
Answer: CFTC
The CFTC regulates U.S. binary options traded on designated contract markets such as Nadex.
What does the 'strike price' represent in a binary option?
Answer: The price level that determines the win/loss outcome
The strike price is the threshold the underlying must be above or below at expiry to win.
A 'call' (or 'high') binary option profits when the underlying asset's price does what relative to the strike at expiry?
Answer: Finishes above the strike
A call/high binary pays out if the underlying settles above the strike price.
Which exchange is the best-known regulated venue for retail binary options in the U.S.?
Answer: Nadex
Nadex (North American Derivatives Exchange) is the leading CFTC-regulated binary options exchange.
On a regulated exchange like Nadex, binary option contracts are typically priced between what range?
Answer: $0 and $100
Nadex binary contracts trade between $0 and $100, settling at $0 if out of the money or $100 if in the money.