Binary Choices Even on Slow Days

Binary Choices Even on Slow Days

Monday, the S&P 500 futures opened the 9:30 a.m. EST session at 2386 and then dropped lower in the first hour to 2380.75, a 5.25 point pullback.

Binary Choices Even on Slow Days
Binary Choices Even on Slow Days Getty Images

On most days, this future will trade in at least a 10-point range. Being early in the session, it was conceivable that this market could go anywhere.  As it turned out, the day was very slow for this market, which experienced the lowest volume and one of the smallest ranges of the year; but with binary options, the potential was always there for traders to be active and involved.  

The table below shows the end-of-day binary options for this instrument that expired at the 4:15 p.m. EST close yesterday. These CFTC-regulated options have a $100 base value, and the profit is always the difference between the risk and the $100 base value.

Binary Choices Even on Slow Days

To trade binary options, traders can select a strike from the table and choose to either buy or sell the option, depending whether they expect price will close above or below that strike at expiration.  

For example, some traders may have believed yesterday that this move to the downside was not over, and that this market would go 10 points from the open down to the 2376.00 area.  In that case, they could have looked for a similar strike on the options table and sold the 2376.00 binary option for $82.50.  If this market settled the day below that strike price, this trade would be successful, yielding a profit of the $82.50 selling price with a risk of just $17.50.  This option could also be day traded by closing it out early before expiration to take a partial profit.

Binary Choices Even on Slow Days

On the other hand, traders who believed this market would travel back to the open could have bought the 2385.00 option, risking the purchase price of $36.25 to potentially earn $63.75 on a settlement above that strike price.  This option could also have been day traded to take profit via an early exit.

Lastly, traders who thought market would move 10 points from the low up to the 2391 area could have bought the 2391 strike, risking just $10.50 to potentially earn $89.50.

Of course, other strikes shown could be utilized depending on your personal trading style and preference.  In addition, other expiration timeframes are available – longer expirations on the weekly basis, shorter time frames on the hourly, and with equity indices, even 20-minute expirations.

Although this was one of 2017’s slowest days for the S&P, with binary options, the potential was always there for traders to be active and involved.  Binary trading offers many creative ways to turn any market view into a trading strategy with the potential to succeed.


Note: Exchange fees not included in calculations.

The information contained above may have been prepared by independent third parties contracted by Nadex. In addition to the disclaimer below, the material on this page is for informational and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument on Nadex or elsewhere. Please note, exchange fees may not be included in all examples provided. View the current Nadex fee schedule. Nadex accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representations or warranties are given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk and any trading decisions that you make are solely your responsibility. Trading on Nadex involves financial risk and may not be appropriate for all investors. Past performance is not necessarily indicative of future results. Nadex contracts are based on underlying asset classes including forex, stock index futures, commodity futures, cryptocurrencies, and economic events.

Trading can be volatile and investors risk losing their investment on any given transaction. However, the design of Nadex contracts ensures investors cannot lose more than the cost to enter the transaction. Nadex is subject to U.S. regulatory oversight by the CFTC.