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

The payout is either a fixed full amount or zero, giving rise to the 'all-or-nothing' nickname.

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

Nadex allows traders to close binary positions before expiry at the prevailing market price.

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

An out-of-the-money binary fails the strike condition and settles at zero.

Question 4

Which statement about binary option risk is accurate?

Accepted Answer

Risk and reward are both known before entering the trade

Answer

Both the maximum profit and maximum loss are fixed and known at the time the trade is opened.

Question 5

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

Accepted Answer

ESMA

Answer

The European Securities and Markets Authority (ESMA) prohibited binary options sales to retail investors in 2018.

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