Nadex What is the Difference Between Binaries And Spread

#1

I am not clear about the difference between binary options and bull spreads

#2

Summary: Binary is a true false statement (if right get $100 at expiration if wrong lose risk put up) Box spread is a direction play very similar to trading an underlying market.

Binary option contracts on nadex have the value of $100 always (per contract) The risk+reward will equal $100 so if the risk is $10 the reward will be $90 and vice versus. A Binary is a true false statement. If you buy a binary you are saying the market will be above a price by expiration time. if correct then you receive the full payout of $100 less risk you put up (i.e. if you put up $20 - you will get a payout of $100 (being a $80 profit + the initial $20 risk). If wrong you will will not receive any payout losing the $20 put up. You can close it at any time. The value will fluctuate as time passes and the market moves. It can be very voltile even in flat markets with just small moves greatly changing the price making them great for trading in flat markets. Note that if selling you are saying false so if it is at or below at expiration you will be profitable on the trade. The instrument is simple but the actual implementation is more complex.

Bull spreads - rather Box Spreads - are a way to trade the underlying market in a manner that closely resembles actually trading the underlying. It is a up or down trade. Buy it means you think the market will rise. Sell it means you think the market will fall. The difference between where the market is at expiration and where you bought it will determine the amount of your p/l. You can never lose more than below the floor on a buy or more than above the ceiling on a sell.

For more details you may want to watch the two intro videos to bull spreads and binaries in the intro market tutorial videos section located here. Plese let us know if you have further questions.