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Chapter 1: Key Features of a Binary Option Contract > Defining the Key Features
Let’s start by defining the features that shape binary option selection and trading. These terms will be used time and again throughout this book, so commit these definitions to memory; you’ll come to know them well.
Expiration Date: The time that the option expires.
Settlement Value: The value of the option on expiration. It will be $0 or a $100-fixed payout at the Nadex Exchange.
Underlying Market Price: This is the actual real-time market price of the underlying contract.
Contract: This is the basic unit of a trade of one lot.
Bid: The premium price that a trader pays for opening to sell a contract, or closing a buy order.
Sell: This refers to betting the underlying market will go down. A trader puts on an open sell order. At Nadex the trader pays for an open sell order ($100 – bid). It is $100 – (bid). This is equivalent to putting on a position anticipating a decrease in the price of the underlying market. It is also the premium price that a trade pays for closing a position that was bought.