The US Commodity Futures Trading Commission (CFTC). which oversees exchanges that offer trading futures contracts and swaps, places limits on the number of contracts a trader can own or trade at one time. Speculative position limits are established to ensure that no individual trader, firm, or group of traders can exert outsized or unfair influence on markets.
That influence can involve creating greater volatility or pushing prices in a particular direction. Without position limits, a trader could potentially harm a company by using options to drive down the share price or manipulate commodity prices by accumulating futures contracts.
In practice, these speculative position limits rarely affect individual traders, because they are so high. They are mainly to protect individual traders by preventing large institutions or groups from manipulating prices or preventing timely fulfillment of orders.
On Nadex, the position limit applies to the aggregate total on a single contract of the asset class. For binary options that are based on an underlying futures contract, the position limit is 2500. For binary options based on forex, there are no position limits.
For Nadex spreads, the position limits are larger and vary depending on the specific underlying futures contract. Nadex spread contracts based on forex do not have position limits.
For example, the Nadex US 500 binary contract, which is based on the CME E-mini S&P 500 futures, has a position limit of 2500 contracts. This means that if you add up the total number of long and short open positions plus all working orders (not including offsetting positions), that number cannot be greater than 2500 contracts. All US500 binary options of any strike and any duration are included in the aggregate calculation.
You can see the specific position limits of each contract listed here.