Binary Trading Essentials 2

Question 1

What are the only two possible outcomes of a binary option at expiry?

Accepted Answer

Fixed payout or total loss of the stake

Answer

Partial profit or partial loss

Answer

Dividend or interest

Answer

Rollover or margin call

Question 2

In a 'high/low' binary option, what is the trader predicting?

Accepted Answer

Whether price will be above or below the strike at expiry

Answer

The exact closing price

Answer

The total daily volume

Answer

The bid-ask spread width

Question 3

What does 'in-the-money' mean for a binary call option?

Accepted Answer

Price finished above the strike

Answer

Price finished below the strike

Answer

Price equaled the strike

Answer

The option expired worthless

Question 4

What is the 'strike price' in a binary option?

Accepted Answer

The reference level that determines win or loss

Answer

The broker's commission

Answer

The maximum payout cap

Answer

The expiry timestamp

Question 5

Why are binary options often described as 'all-or-nothing' instruments?

Accepted Answer

The payout is fixed and the loss is the full stake

Answer

They never expire

Answer

They guarantee profit

Answer

They pay continuous interest

Question 6

What typically determines a binary option's expiry?

Accepted Answer

A preset time chosen when the trade is opened

Answer

The trader's account balance

Answer

The underlying's dividend date

Answer

The exchange opening bell only

Question 7

What is the underlying asset in a binary option?

Accepted Answer

The market the option's outcome is based on, like a stock or currency pair

Answer

The broker's reserve fund

Answer

The payout percentage

Answer

The trading platform software