Binary Trading Facts 5

Question 1

What is the typical duration range for short-term binary options offered by many platforms?

Accepted Answer

From 60 seconds to several hours or end of day

Answer

Always one calendar year

Answer

A minimum of 30 days

Answer

Exactly one week only

Question 2

Which U.S. agency, alongside the CFTC, has warned investors about fraudulent binary options schemes?

Accepted Answer

SEC

Answer

EPA

Answer

USPS

Answer

TSA

Question 3

What is meant by the 'settlement value' of a binary option?

Accepted Answer

The final price ($0 or $100) the contract is worth at expiry

Answer

The broker's deposit requirement

Answer

The average daily price

Answer

The opening bid

Question 4

How does the breakeven win rate relate to binary options with payouts below 100%?

Accepted Answer

A trader must win more than half the time to be profitable

Answer

Winning half the trades guarantees profit

Answer

Win rate does not matter

Answer

Losing trades cost nothing

Question 5

What is one legitimate use of binary options for sophisticated traders?

Accepted Answer

Hedging or expressing a view on a specific price level by expiry

Answer

Earning guaranteed fixed income

Answer

Avoiding all market risk

Answer

Replacing a savings account

Question 6

Which factor most directly affects a binary option's price as expiry approaches?

Accepted Answer

The probability the underlying will finish past the strike

Answer

The broker's office location

Answer

The number of other traders online

Answer

The age of the trading account

Question 7

What distinguishes exchange-traded binary options from those offered by many offshore brokers?

Accepted Answer

Exchange-traded ones are regulated and not the trader's counterparty

Answer

Offshore ones are always cheaper

Answer

Exchange-traded ones have no expiry

Answer

Offshore ones are government-insured