Binary Trading Binary Options Types and Structures 2 — Questions and Answers
Question 1: What is a 'Ladder' binary option?
- An option offering multiple strike price levels, each with its own predetermined payout percentage (Correct answer)
- An option that pays out based on market volatility only
- An option where traders can add funds at multiple intervals during the trade
- An option that resets its strike price every hour
Correct answer: An option offering multiple strike price levels, each with its own predetermined payout percentage
A Ladder binary option presents several strike prices at different levels — the further the target from the current price, the higher the potential payout percentage.
Question 2: In binary options, what is the 'expiry time'?
- The time the broker takes to process a withdrawal
- The time after which a losing trade can be appealed
- The predetermined moment at which the option's outcome is determined (Correct answer)
- The deadline for placing a new trade on the platform
Correct answer: The predetermined moment at which the option's outcome is determined
The expiry time is the specific future moment when the binary option's outcome is settled — the asset price at that exact instant determines whether the trade wins or loses.
Question 3: What is a 'Double One Touch' binary option?
- An option that requires the price to touch the same level twice
- An option that pays out if the price touches either of two target levels before expiry (Correct answer)
- An option that doubles the payout if price moves in your favor twice
- An option with two separate expiry times
Correct answer: An option that pays out if the price touches either of two target levels before expiry
A Double One Touch option pays out if the asset price touches either of two predefined price levels (one above, one below the current price) before the option expires.
Question 4: What characterizes a 'Pairs' binary option?
- Predicting which of two assets will outperform the other within a set time period (Correct answer)
- Trading two binary options simultaneously on the same asset
- Pairing a Call and a Put option on the same asset simultaneously
- Trading currency pairs exclusively in the forex market
Correct answer: Predicting which of two assets will outperform the other within a set time period
Pairs binary options involve comparing the relative performance of two assets (e.g., Apple vs. Google stock), with the trader predicting which will perform better within the time period.
Question 5: Which statement best describes a '60-Second' binary option?
- An option that guarantees a 60% return on investment
- An option with an expiry time of exactly 60 seconds after purchase (Correct answer)
- An option that can be traded for a minimum of 60 minutes
- An option allowing 60 seconds to decide before automatic execution
Correct answer: An option with an expiry time of exactly 60 seconds after purchase
A 60-second binary option expires exactly 60 seconds after being placed, making it the shortest standard binary option expiry available on most trading platforms.
Question 6: What is the typical financial outcome when a binary option expires 'Out of the Money'?
- A loss of 50% of the invested amount
- Loss of the full invested amount minus any broker refund (typically 0–15%) (Correct answer)
- Only the broker's commission fee is deducted
- No loss — binary options carry no downside risk
Correct answer: Loss of the full invested amount minus any broker refund (typically 0–15%)
When a binary option expires out of the money, traders typically lose their entire investment, though some brokers offer a small consolation refund of 0–15%.
Question 7: What does 'In the Money' (ITM) mean for a Call binary option?
- The option's strike price equals the current asset price
- The current asset price is below the strike price
- The current asset price is above the strike price (Correct answer)
- The option has not yet been placed on the platform
Correct answer: The current asset price is above the strike price
For a Call binary option, In the Money means the underlying asset's current price is above the strike price, meaning if the option expired now, it would generate a payout.
Binary Trading Binary Options Types and Structures 2
What is a 'Ladder' binary option?