This is just one of the many strike prices you can choose, each of which will come with its own risk-to-reward ratio. What this means is ‘will the US 500 finish higher than 3101.6 at 4 p.m.?’ If you think it will, you buy. You then look at the different strike prices available. You want to trade a binary option contract based on this market, and you choose an expiration time of 4 p.m. Let’s say the indicative price for the US 500 is 3039.811 at 2.30 p.m. Here’s an example to show what strike prices look like and how they are used in trading: Learn more about binary options, what they are, and how they work. The contract buyer receives the $100 payout if the market is at or above the strike at expiration, and the seller receives the $100 payout if the market is below the strike at expiration. Nadex events contracts work a little differently. These are the various potential outcomes:Ĭontract expires above the strike ( in-the-money) – buyer receives $100, seller receives $0.Ĭontract expires at or below the strike ( at-the-money or out-of-the-money) – seller receives $100, buyer receives $0. You would sell a contract if you think the market will be below the strike at expiration. This payout amount is dictated by the strike.įor Nadex Binary Option contracts based on stock indices, forex, and commodities, you would buy a contract if you think the market will be above the strike at expiration. Nadex strike pricesīinary options are all or nothing, so when you’re trading them, you will receive a payout of either $100 or $0. You decide on the contracts you want to trade, and whether you are going to buy or sell those contracts, based on the strike price. A binary option strike price is best thought of as a question: will the market be at, above or below this price, at this time?Įach binary option contract has its own strike price. The way a strike price is used will depend on the type of option in question. What does strike price mean in options trading? In binary options trading, the strike price is the level a trader thinks the market will be above or below. In put and call options trading, the strike price is the price at which a security can be bought or sold. Strike price definition What is a strike price in trading?Ī strike price is a theoretical market price used in options trading.
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