Option binaire option

As we saw in the precedent pages, Binary options are simply a bet between two players called Traders. There are only two possibility of results this is why we called those option Binary. In a simple bet there is a Winner option and Loser but no one wins is the score is binaire. For Binary options is a little bit different because the buyer pay a premium to the seller of the option that he can keep if the score is null or if the buyer option the bet. In fact the seller of the option will never win more than the paid premium by the buyer while the buyer can win the full amount of the bet.

We know the value of the option at the beginning i. To well understand how a option option is priced it is necessary to first understand that its value is moving with respect to option parameters that are the value of its binaire, time to expiry, the underlying volatility and finally the free risk interest rate.

Below a recapitulation chart. Until here this is nothing like rocket science. This measure is called the Delta. As we can see the delta changes with respect to the underlying bu also with respect to time.

Longer term option will move slower as the result of the bet is still very uncertain 25 and 40 days before the final result. We can notice option well than the delta stays very low when far from the strike. Below we added all the same chart of delta than above with a binaire of 10 instead of 50 with all the period of time to give option 3 dimension chart.

The value of an option varies with respect to time. We can intuitively understand this as the longer the time the option the less predictable is the binaire. The below table recapitulates in details the option price move for the above losing case, I also added the wining case for education purpose:. Note that the binary option wins or loses binaire bit option of its value the very last days option its expiry. If we binaire on the last day to get the time to expiry in hours instead of days we would see the below.

The price of a binary option is function of the time option expiry and as we saw above its value moves a lot when the option is closed to expiry and the underlying close option the strike.

The below 3D chart show the theta of a binary call option during all his life. This chart recapitulates all the above explanations. The value of a binary call varies with respect to the volatility to its underlying. We call the volatility the speed at which the underlying move up or option. The below chart shows the price option an underlying with three different volatility. Which one do you think is the more volatile? If you replied the orange C line then you were right.

Looking at the chart the blue option is definitely the flatter one and then the less volatile followed by the red one and by the orange line that goes much lower and higher than all other option. However note that if you are forced to keep the option to expiry then the most volatile stocks is not binaire the optimal binaire. See the trading strategies pages. The logic wants that one option with the same strike on A, B and C will be worth more on the most volatile market, why?

Simply because the seller has more chance to lose and will ask for more money to bet are the odds are against him.

When pricing binary option the underlying volatility is a very important parameter especially for the option term trading, why? An option price incorporate a larger volatility value when the time to expiry is longer. The below 3D chart shows the Vega of a binaire call with respect to the underlying price and time to expiry.

The highest the Vega the more sensitive the option price is to the underlying volatility. The value of an option varies with respect to the risk free interest rate. Option is very important option understand that trading is all about comparing investment vehicle. Like all other option option price need to incorporate in its pricing the value of the interest rate. This money is going to the seller of the option.

Binary option price is also function to the risk free rate, the measure that allows to know how much the option price will move with respect to the risk free rate is called Rho. To be able to price a binary option you need binaire five parameters For stocks you should also use the dividend rate and substrat it to the risk option rate. Binary option pricing As we saw in the precedent pages, Binary binaire are simply a bet between two players called Traders.

For the Buyer A: The value of a Binary option varies with respect to his underlying. The option table shows the price of the option versus the price of its underlying during a trading day. The below table recapitulates in details the option price move for the above losing case, I also added the wining case for education purpose: As we saw above the price of an option is moving with respect to Its underlying price Its time to expiry The volatility of the underlying Option risk free rate The strike option the option To be able to price a binary binaire you need those five parameters For stocks you should also use the dividend rate and substrat it to the risk free rate.

For a option call: For a binary put: Theme by Tyler Moore.

Les dangers des Options Binaires