As we already know, the binary option only has two outcomes. It is either true and closes at 100, or it is false and closes at 0. This is all dictated by the strike price. As a binary options trader we therefore have only one decision to make as follows, and on the Nadex platform:
If we believe the strike price will be exceeded at expiry then we buy If we do not believe the strike price will be exceeded at expiry then we sell However, just to reiterate the above buy and sell is as follows:We buy (purchase) if we agree with the statement, and sell (purchase) if we disagree.
The buttons on your trading platform may say many things. They may say, buy and sell, call and put, purchase and purchase, agree or disagree. However, in all these cases you are in effect buying – buying to say yes, and buying to say no. The Nadex platform uses buy and sell, but it is the above context of agreement or disagreement.
Buy to say yes, and sell to say no.Just as in the futures market where buyers and sellers are matched by the exchange, so the same occurs here.This instantly removes the issues associated with many bucket shops where you are often trading directly against them. In an exchange traded binary option this never occurs.
The exchange simply matches buyers and sellers, and every option is fully collateralized by the two parties in cash. Unlike some futures, binary options are always cash settled so there is never any physical delivery to worry about.