We will provide you with a couple of examples of a typical call option traded on a fictional Binary Option Broker, “OptionBlast”.
Example Scenario #1: (5% Broker Rebate)
For this particular option, OptionBlast is offering a payout of 80% if the call option ends up in the money and 5% if the option ends up out of the money.
An investor buys a call option for $100.00 in company XYZ (fictional). XYZ is trading at $60.00 at the time of the option purchase. If XYZ is trading above $60.00 at the option expiration the trade will be in the money and the investor will get his 80% return from OptionBlast and now have $180.00. If the price of XYZ is below $60.00 at the option expiry the trade will be out of the money and the investor will receive his rebate of $5.00 from OptionBlast.
Example Scenario #2: (No Broker Rebate)
For this particular option, OptionBlast is offering a payout of 85% if the call option ends up in the money and 0% if the option ends up out of the money.
An investor buys a call option for $1,000.00 in company ABC (fictional). ABC is trading at $50.00 at the time of the option purchase. The investor buys a call option which states that the investor will profit if the stock ends above $50.00 at the expiration time. If ABC is trading above $50.00 at the option expiration the trade will be in the money and the investor will get his 85% return from OptionBlast and now have $1,850.00. If the price of ABC is below $50.00 at the option expiry the trade will be out of the money and the investor will lose his total investment.
