# Settlement on Binary Option Short Trades-Apa itu Binary Option

Settlement of short binary options trades is a bit trickier than settlement of long trades. But if you keep the basic principle of \$100 per contract if you are correct and \$0 per contract if you are wrong, you should be able to pick
up the concept pretty quickly.In order to have an understanding of how short binary option trades are settled, you must have a clear understanding of how short binary option trades work and how they are collateralized.

If you need further clarification on these concepts, please refer to the section on collateral.As you will recall from the section on collateral, when you sell a binary options contract, you put up the full collateral. Full collateral means that you are putting up your maximum potential loss to enter your trade.

The formula for maximum loss is:\$100 – Option Premium = Maximum Loss on Short Trade In a short trade your maximum potential loss per contract is \$100 minus the option’s premium.Remember, the value of a contract goes to \$100 at expiration if the underlying is trading above the strike price. For example, let’s assume that you are selling a binary option for \$40.

The most you can lose when that option expires is \$60.Exhibit 5.8 is a graphical representation of the profit and loss on a short position. In this example the required collateral and maximum loss (dark grey shaded area) is \$60, which is calculated by subtracting 100 from the option premium (\$40).