Binary Trading Facts 4

Question 1

Why are binary options sometimes called 'all-or-nothing options'?

Accepted Answer

They pay a fixed amount or nothing at all

Answer

They require all capital up front

Answer

They can only be traded all at once

Answer

They have no partial fills

Question 2

On Nadex, can a trader exit a binary option position before expiry?

Accepted Answer

Yes, by selling the contract at its current market price

Answer

No, all positions must be held to expiry

Answer

Only with broker permission

Answer

Only on weekends

Question 3

What does the term 'out of the money' mean for a binary option at expiry?

Accepted Answer

The condition was not met and it settles worthless

Answer

It earned the maximum payout

Answer

It broke even

Answer

It rolled over to the next period

Question 4

Which statement about binary option risk is accurate?

Accepted Answer

Risk and reward are both known before entering the trade

Answer

Losses can exceed the initial stake

Answer

Profits are unlimited

Answer

There is no risk if held to expiry

Question 5

In 2018, which European regulator banned the sale of binary options to retail clients?

Accepted Answer

ESMA

Answer

OPEC

Answer

NATO

Answer

WTO

Question 6

What typically happens to the payout structure as a binary option's strike moves further from the current market price?

Accepted Answer

The cost decreases because it's less likely to finish in the money

Answer

The cost increases

Answer

The payout doubles

Answer

Nothing changes

Question 7

What is a key reason regulators classify many binary options as high-risk, speculative products?

Accepted Answer

Their short timeframes and gambling-like payoff make consistent profit difficult

Answer

They guarantee returns

Answer

They are insured by the government

Answer

They have no expiry risk