# Questions tagged [binary-options]

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### Units when replicating a digital call with vanilla spread

This is an embarassingly basic question, but in the course of studying windmill adjustment in binary FX options, I unexpectedly got stuck figuring out the correct units. Say we have a domestic binary ...
42 views

### Buying a double no touch

Why does buying a double no touch get me long butterfly exposure? I understand short volatility exposure but can’t see why I would get long butterfly as I would’ve thought I would want wing volatility ...
103 views

### Difference of digital (binary) option price under normal and log-normal assumption

Here is the question asked in interview： What's is the difference of digital (binary) option price under normal and log-normal assumptions of spot? I think the log normal has fatter right tail than ...
• 517
152 views

### Why can’t delta’s be used to price double no touch options?

Here is the link to a MATLAB one touch option pricing calculator I used:OT I tried several inputs and I noticed that the one touch option price is approximately twice the delta of an equivalent ...
50 views

### Clarity regarding Skew adjustment for binary options

I am reading the section on Skew adjustment for binary options on wikipedia (https://en.wikipedia.org/wiki/Binary_option#Skew) and am trying to get my head around it and gain some intuition. First ...
• 778
155 views

### The greeks, vanillas and digitals

Question 1: I know website’s like: https://optioncreator.com/ display the pricing and payoff graphs of regular plain vanilla puts and calls. I would like to know if there is any website that displays ...
102 views

### Option Pricing - Incorrect price outcome for Out of the Money (OTM) calls

I have the options data for a stock - ...
• 113
430 views

### Digital and binary put/call options

I'm looking for put-call parity for the call and put digital options, but I don't really know what is digital options and it's difference between ...
• 11
1 vote
145 views

### Reason why a European binary call should be worth half of its American counterpart when driftless and out-of-the-money

Exercise 11 of chapter 8 of Mark Joshi's "The concepts and practice of mathematical finance", asks to compare prices of an American and a European digital (binary) calls when out-of-the-...
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1 vote
353 views

### Pricing binary options

A binary option pays an amount of money if an event takes place and zero otherwise. Binary options are usually used to insure portfolios against large drops in the stock market. On March 25, 2021 the ...
280 views

### Intuitive explanation for the value of a binary option being lower when volatility skew is positive?

According to the formula for pricing binary options with a volatility skew, it appears that the value of the binary option for a given strike gets lower, the higher the volatility skew at that strike. ...
• 41
195 views

### Why do Binary Options have a bad reputation?

Actually, I have no experience with binary options trading but on the internet, I see that people talk about them in a bad way. Why does binary options trading has a bad reputation? Thanks
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1 vote
103 views

### Cash or nothing option question [closed]

I got stuck in one exercise of binary options, it says that I have to consider a stock that does not pay dividends, the current price of the stock is 100, the volatility of it is 20%, the risk-free ...
508 views

• 830
1 vote
55 views

### Calibration using only strike price

I have a binary option and want to calibrate it's BS pricing model. I only have a series of Strike Price vs the Option price, no knowledge on time to maturity, volatility, risk free rate or the ...
1 vote
224 views

### What is the shape of the delta graph of the binary option?

I was wondering what the shape of the graph of the delta or the binary option would be.
• 11
570 views

### Deriving the black-scholes formula for the European asset-or-nothing call option

I would like to find out what boundary/final conditions i should be using to find the formula for a European asset-or-nothing call option, as i feel that is where I'm making my mistake. I've read ...
535 views

### Bachelier Pricing Formula for Interest Rate Binary Options

Similarly to the Black and Scholes formula, I am looking to replicate Bachelier's caplet formula with two digital options: (1) asset-or-nothing (forward rate in this case) and (2) cash-or-nothing. For ...
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182 views

1 vote
414 views

### Double knockout binary pricing?

I'm studying the pricing of a Double-Barrier binary option on the price of $S$. By this I mean an option that pays $X$ at maturity $T$ if the lower ($H1$) or upper barriers ($H2$) are not hit during ...
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154 views

### Where can I see the bid stack for FX?

In trading FX binary options on brief tenors like 1 hour, I frequently see the FX price bounce right on the expiry boundary, like hourly or 20 minute boundaries. I would like to figure out if these ...
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