Binary Option Settlement

Binary option settlement is a deterministic process in decentralized finance where the payout of an option is determined solely by whether an underlying condition is met at expiration. Unlike traditional options, binary options have a fixed, all-or-nothing payout structure.

If the asset price is above or below the strike price at the settlement time, the contract pays out a fixed amount; otherwise, it expires worthless. The settlement is governed entirely by the smart contract code, which references an oracle feed to verify the final price.

This eliminates the need for manual exercise or clearinghouse intervention. It simplifies the risk profile for traders, as the maximum gain and loss are known upfront, making them popular instruments for hedging and speculation.