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.
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.
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.