We will provide you with examples of a typical put option traded on a fictional Binary Option Broker, “OptionBlast”.
Example Scenario #1 (Broker’s Rebate):
For this particular option, OptionBlast is offering a payout of 75% if the option ends up in the money and 10% if the option ends up out of the money.
Investor buys a put option for $100.00 in company XYZ (fictional). XYZ is trading at $40.00 at the time of the option purchase. If XYZ is trading below $40.00 at the option expiry the trade will be in the money and the investor will get his 75% return from OptionBlast and now have $175.00. If the price of XYZ is above $40.00 at the option expiry the trade will be out of the money and the investor will receive his rebate of $10.00 from OptionBlast.
Example Scenario #1 (No Broker’s Rebate):
For this particular option, OptionBlast is offering a payout of 82% if the option ends up in the money and 0% if the option ends up out of the money.
Investor buys a put option for $1,000.00 in company ABC (fictional). ABC is trading at $50.00 at the time of the option purchase. If ABC is trading below $50.00 at the option expiry the trade will be in the money and the investor will get his 82% return from OptionBlast and now have $1,820.00. If the price of ABC is above $50.00 at the option expiry the trade will be out of the money and the investor will lose his investment.
