Cash-or-Nothing Options

Cash-or-nothing options are a simple form of binary option that pays a fixed cash amount if the underlying asset price is above (for a call) or below (for a put) the strike price at expiration. If the condition is not met, the holder receives nothing.

These are popular in the crypto market for their simplicity and clear risk-reward profile. They do not involve the delivery of the underlying asset, only a cash settlement.

This makes them easy to integrate into decentralized finance platforms and trading interfaces. However, they carry significant binary risk, as a move of even a single cent can result in the total loss of the investment.

Traders use these to speculate on price levels or to hedge specific binary events, such as a protocol upgrade or a regulatory announcement. The pricing is based on the probability of the price being in the money at expiration, often derived from the Black-Scholes model for binary options.

They are a pure expression of directional belief.