The market price of a stock, commodity, or currency in binary options trading is its current price. In simple words, the market price is the value that a trader gets after selling an option. Also, it is the value at which an asset can be purchased.
Unlike the strike price, the market price of an asset is not fixed. That means the market price keeps on changing during the option’s life.
How is the Market Price determined?
Although market price is not fixed, it can be easily determined. For example, to know the market price of a given asset, you can calculate the demand of a particular asset and the interaction of supply.
Parts of the Market Price
The market price of an option is further divided into two parts, i.e., time value and intrinsic value.
The intrinsic value is a simple way of measuring an asset’s worth. It represents the difference between a given asset’s market price and strike price. For instance, if the strike price of an asset is $20 and the market price is $30, then its intrinsic value would be $10.
In some cases, an options intrinsic value and time value both becomes zero. At this time, the value of an asset also decreases because there would not be any gain or loss when selling or buying that particular asset.
The market price is one of the important components of binary options trading. Some binary options trading is possible when the market price is higher than the strike price, while others are possible when the strike price is higher than the market price.