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
Why are binary options sometimes called 'all-or-nothing options'?
Answer: They pay a fixed amount or nothing at all
The payout is either a fixed full amount or zero, giving rise to the 'all-or-nothing' nickname.
On Nadex, can a trader exit a binary option position before expiry?
Answer: Yes, by selling the contract at its current market price
Nadex allows traders to close binary positions before expiry at the prevailing market price.
What does the term 'out of the money' mean for a binary option at expiry?
Answer: The condition was not met and it settles worthless
An out-of-the-money binary fails the strike condition and settles at zero.
Which statement about binary option risk is accurate?
Answer: Risk and reward are both known before entering the trade
Both the maximum profit and maximum loss are fixed and known at the time the trade is opened.
In 2018, which European regulator banned the sale of binary options to retail clients?
Answer: ESMA
The European Securities and Markets Authority (ESMA) prohibited binary options sales to retail investors in 2018.
What typically happens to the payout structure as a binary option's strike moves further from the current market price?
Answer: The cost decreases because it's less likely to finish in the money
Strikes far from the current price are less likely to win, so the contract costs less to buy.
What is a key reason regulators classify many binary options as high-risk, speculative products?
Answer: Their short timeframes and gambling-like payoff make consistent profit difficult
Short expiries and fixed binary payoffs make them speculative and statistically hard to profit from consistently.