Binary Examples

You decide the FTSE 100 will have a big shift after the US non-farm payrolls figure is announced. You decide to 'buy' £10 per point at the offer price of both the 'FTSE^® to finish up more than 50 points' binary and the 'FTSE^® to finish down more than 50 points' binary. Our current price for these positions is as follows:

•     8-11 for 'FTSE^® to finish up by more than 50 points' 
•     6-9 for 'FTSE^® to finish down by more than 50 points' 

As you are 'buying', you pay the offer price in each instance for a total price, or stake, of 20 (11+9) points to back a 50-point FTSE 100 move in either direction.

Calculating your profit/loss

All binaries will finish at 100 if the statement is true, and at zero if false. From this you subtract your stake (20 points, in this case) to calculate your profit/loss.

In our scenario, let's say payroll figures are significantly better than expected and the FTSE climbs suddenly as a result to close 74 points higher. So, you were proved right and the binary settles at 100.

You can use binaries to benefit from markets when you expect little movement

Let's say the FTSE 100 is currently trading at 5360 and the market is quiet. You don't believe the market will move any higher than its current level, so you 'sell' £10 per point of the daily 'FTSE^® to touch 5400' contract at the current price of 40. By using a OneTouch binary in this way you have 'sold' volatility on the FTSE 100.

You will make £400 (40 x £10) if the FTSE fails to hit 5400 during the rest of the day, and you will lose £600 (60 [100-40] x £10) if you are wrong and the FTSE 100 moves higher and hits 5400 before the close.

Calculating your profit/loss

In our scenario, let's say the FTSE does in fact rise to above 5400 during the afternoon. This means your binary will settle at 100 and you will make a loss on the position.