BINARY OPTION MONEY STRATEGY MAKE MONEY ONLINE THROUGH INVESTMENT 132










In 2007, the Options Clearing Corporation proposed a rule change to allow binary options, In May 2008, the American Stock Exchange (Amex) launched exchange-traded European cash-or-nothing binary options, and the Chicago Board Options Exchange (CBOE) followed in June 2008. The standardization of binary options allows them to be exchange-traded with continuous quotations.

Amex offers binary options on some ETFs and a few highly liquid equities such as Citigroup and Google. Amex calls binary options “Fixed Return Options” (FROs); calls are named “Finish High” and puts are named “Finish Low”. To reduce the threat of market manipulation of single stocks, Amex FROs use a “settlement index” defined as a volume-weighted average of trades on the expiration day. Amex and Donato A. Montanaro submitted a patent application for exchange-listed binary options using a volume-weighted settlement index in 2005.

CBOE offers binary options on the S&P 500 (SPX) and the CBOE Volatility Index (VIX). CBOE only offers calls, as binary put options are trivial to create synthetically from binary call options. BSZ strikes are at 5-point intervals and BVZ strikes are at 1-point intervals. The actual underlying to BSZ and BVZ are based on the opening prices of index basket members.

Both Amex and CBOE listed options have values between {videoDescription} and , with a multiplier of 100, and tick size of {videoDescription}.01, and are cash settled.

In 2009, Nadex, a U.S.-based binary options provider launched binary options on a range of forex, commodities and stock indices markets.

Example of a binary options trade
A trader who thinks that the EUR/USD price will close at or above 1.2500 at 3:00 p.m. can buy a call option on that outcome. A trader who thinks that the EUR/USD price will close at or below 1.2500 at 3:00 p.m. can buy a put option or sell a call option contract.

At 2:00 p.m. the EUR/USD price is 1.2490. The trader believes this will increase, so he buys 10 call options for EUR/USD at or above 1.2500 at 3:00 p.m. at a cost of each.

The risk involved in this trade is known. The trader’s gross profit/loss follows the “all or nothing” principle. He can lose all the money he invested, which in this case is x 10 = 0, or receive 0 x 10 = ,000. If the EUR/USD price will close at or above 1.2500 at 3:00 p.m. the trader’s profit will be the payoff at expiry minus the cost of the option: ,000 – 0 = 0.

The trader can also choose to liquidate (buy or sell in order to close) his position prior to expiration, at which point the option value is not guaranteed to be 0. The larger the gap between the spot price and the strike price, the value of the option decreases, as the option is less likely to expire in the money.

In this example, at 3:00 p.m. the spot has risen to 1.2505. The option has expired in the money and the gross payoff is ,000. The trader’s net profit is 0.

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