options at different strike prices, dividing the move into several pieces, each with limited risk. Example, lets look at an example. Successful traders always have an exit strategy. If you click Sell, your order ticket will show your maximum risk as 73 points (100 - 27) times.00 per point.00. If risking 73 to make 27 seems like an odd choice, think of it this way: the price of 73 reflects a roughly 73 probability at the time you entered the trade that the binary would expire worthless. For details of how fees are calculated, please see.
Your reaction may be, That cant happen to me, I use stops to manage my risk. Each point is worth.00, total contract value is 100.00, the buyers maximum risk is the buy price minus the floor of zero. You have essentially bought time to be right. Unfortunately, the history of trading is littered with the busted accounts of traders who traded the old-fashioned way, only to have one surprising event drain their account and even leave them owing more money. It might go to zero, but it wont go negative. A better way to limit risk than stop-loss orders.
You can, however, get out early with a smaller-than-maximum loss. If you don't have 73 in rate canadian dollar to peso your account, the trade won't go through. Not every trade will be successful, but with Nadex you are guaranteed that you get to decide your worst-case scenario before you place the trade. For every buyer, theres a seller. A binary option, by contrast, might go to zero value, but you wont be stopped out of the trade. When a binary option expires worthless, the seller gets 100 minus the initial sell price. In this case, you paid 73 to be a seller, so your maximum reward would. On the buy side, the best possible outcome is always 100. The risk profile of binary options may be the best thing about them. In this example that would be 100 27, or 73 points, which equals.00 (represented by green in the left graph above). Say you wanted to buy a US 500 binary option.
As a seller, you put.00 in collateral to execute the trade. And 73 is all you can lose.