Binary Trading Facts 2

Question 1

What is the maximum loss a trader can incur on a single standard binary option position?

Accepted Answer

The full premium paid

Answer

Twice the premium

Answer

Unlimited

Answer

Half the premium

Question 2

A binary option that expires 'in the money' typically pays out which of the following?

Accepted Answer

A fixed predetermined amount

Answer

A percentage of market volatility

Answer

The underlying asset's full value

Answer

A variable amount based on how far in the money it is

Question 3

In the United States, which regulator oversees legally traded binary options on designated exchanges?

Accepted Answer

CFTC

Answer

FDA

Answer

FCC

Answer

SBA

Question 4

What does the 'strike price' represent in a binary option?

Accepted Answer

The price level that determines the win/loss outcome

Answer

The broker's commission rate

Answer

The total payout amount

Answer

The expiry time of the contract

Question 5

A 'call' (or 'high') binary option profits when the underlying asset's price does what relative to the strike at expiry?

Accepted Answer

Finishes above the strike

Answer

Finishes below the strike

Answer

Stays exactly at the strike

Answer

Moves with high volatility

Question 6

Which exchange is the best-known regulated venue for retail binary options in the U.S.?

Accepted Answer

Nadex

Answer

NYSE

Answer

CBOT

Answer

LME

Question 7

On a regulated exchange like Nadex, binary option contracts are typically priced between what range?

Accepted Answer

$0 and $100

Answer

$0 and $1

Answer

$1 and $1000

Answer

$100 and $500