Binary Options: A Smarter Way To Trade The World's Markets
Learn about the powerful advantages that exchange-traded binary options offer to traders. They truly can be a smarter way for you to trade.
Whether you're an experienced trader or a beginner, this guide will teach you both the technical details of binary option trading and the strategy advantages they can give you.
This is the definitive guide to binary options from the leading US exchange of its kind.
Here's some of what's inside:
A binary option asks a simple yes/no question: will this market be above this price at this time?
You buy the option if you think yes and sell if you think the answer is no.
When the binary option expires, if you were right about the market’s price, you’ll get the full $100 value. If you were wrong, you’ll get zero.
When you enter a trade, you pay an amount less than $100 based on the probability of the binary option expiring with an answer of “yes.” You can never lose more than you paid.
Your maximum profit is $100 minus that amount you paid (and a low, capped fee).
With Nadex binary options, your trade can also go a third way.
You can also close your position before expiration:
- If the trade is losing and you don’t want to stay
- If you want to take a smaller profit early
Who sets a binary option’s price? And how?
The buyers and sellers decide the price at any given moment based on their collective opinion. Nadex doesn’t play a role in pricing. We operate the matching engine, connecting buyers to sellers and making sure all trades are fair and accurate.
When should you hold on till expiration?
There are multiple scenarios and only practice will tell you when you want to hold versus exiting early. But if that EUR/USD did a slow but steady climb to 1.2998, then 1.2999, and now there’s about ten minutes left, you’ll be facing a situation where your binary has already lost some value, but is just one tick away from being in the money and worth the full $100.
There’s no right or wrong choice, but can you see why some would hold on to give the market a chance to gain that last tick?
You already know your maximum loss. It’s the $30 (plus fees) that you paid upfront.
If trying for that last tick is worth $30 to you (versus the $20 or so you’d lose if you exited early) then hold onto the binary until expiration.
Either way, it’s your choice. A choice you can make knowing precisely what the worst-case scenario is. That’s the point of binary option trading. Limited risk just might remove some of the limits on your own sense of confidence and possibility.
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Our trading e-books are available as a free download. From Binary Options 101 to advanced guidebooks on trading volatility and trend direction, our library of e-books gives you a solid education and a complete reference library for you to return to as you advance in your trading.
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