What Are Nadex Binary Options?


Quick Answer

Nadex binary options are contracts that are based in a yes or no market proposition, according to Nadex. They have a short term and carry a limited level of risk.

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Full Answer

Nadex binary options make it possible for traders to participate in the most active trading markets while putting up comparatively low collateral, explains Nadex. Nadex binary options provide several benefits, such as the guarantee that investors do not lose more than what they invest; low contract prices between zero and $100, as of 2015; and the option of expiration dates that last between 20 minutes and one week.

If the condition of a binary option contract is fulfilled, then it settles with a settlement value of 100, because it is a cash-settled contract. Likewise, if the condition of a binary contract is not fulfilled, it settles with a settlement value of 0 at the expiration of the binary contract. Strike prices of binary option contracts are the level against which the binary contract option is fulfilled. Traders are provided with an option of several different ranges of strike prices, dependent on the expiration time that the trader chooses for their binary option contract. Nadex uses an indices and commodities process to determine the value of a binary option contract when it expires.

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