It is midday and the euro against the US dollar is standing 20 points below the previous day's settlement price (the price at 14.00 Chicago time). You think the market is not likely to recover by the time the Binary settles.
Our price for the euro/dollar to finish up is 38 - 41.5.
You decide to sell 10 contracts at 38, the bid price. Each contract is worth US$10 per point. The worst outcome for you would be for the euro/dollar to finish up and therefore for the Binary to expire at 100. So you are risking (100 - 38) x 10 contracts x US$10 = US$6200. Should the underlying market not finish up on the day, however, the Binary would expire at zero, meaning that you would make 38 x 10 contracts x US$10 = US$3800.
Several hours later, the exchange rate has recovered slightly but is still 10 points down on the day. Our quote for the E/$ Up Binary is now 11.8 - 15.3. You could take your profit here, but decide to hold on to the expiry.
At 14.00 Chicago time, the E/$ finishes just 4 points lower than the previous day's 14.00 price. It's close, but the E/$ has finished down and therefore the E/$ Up Binary expires at 0.
Profit
| Opening level | 38.0 |
| Closing level | 0.0 |
| Difference | 38.0 |
Profit = 38.0 x 10 contracts x $10 = $3800