A binary outcome depends on a specified proposition, so a small difference around its boundary can change the result. The SEC and CFTC’s investor alert describes binary options as contracts whose payout depends on a yes-or-no proposition. A settlement review must therefore identify the proposition precisely, including the numerical observation used to test it. SEC and CFTC: Investor Alert — Binary Options and Fraud
Follow the evidence
Trace how the event could reach markets, then inspect a competing explanation.
Compare explanations
Switch lenses to see what each account explains—and what remains uncertain.
Suppose an explicitly hypothetical contract pays when a designated observation is strictly greater than 1.2345. Using the first exact value satisfies that invented condition; using the second does not. The result follows from the assumed proposition and exact values. It is not a claim about any real contract, observed market price or actual settlement. If the hypothetical condition instead says greater than or equal to the threshold, exact equality receives a different treatment. A number shown as 1.2345 after rounding does not establish exact equality. The contract’s comparison rule and its precision rule therefore require separate attention. One cannot be reconstructed merely by reading the other from a short screen label. The observation source adds another layer. Two data services can display similarly rounded quotes without establishing that they supplied the same underlying observation at the same instant. A settlement record should identify the designated source, timestamp, price field and applicable precision. A screen capture remains useful evidence, but only for the information it actually preserves.
Suppose an explicitly hypothetical contract pays when a designated observation is strictly greater than 1.2345. Using the first exact value satisfies that invented condition; using the second does not. The result follows from the assumed proposition and exact values. It is not a claim about any real contract, observed market price or actual settlement. If the hypothetical condition instead says greater than or equal to the threshold, exact equality receives a different treatment. A number shown as 1.2345 after rounding does not establish exact equality. The contract’s comparison rule and its precision rule therefore require separate attention. One cannot be reconstructed merely by reading the other from a short screen label. The observation source adds another layer. Two data services can display similarly rounded quotes without establishing that they supplied the same underlying observation at the same instant. A settlement record should identify the designated source, timestamp, price field and applicable precision. A screen capture remains useful evidence, but only for the information it actually preserves.
For an audit trail, keep the written proposition, threshold, comparison operator, specified observation and source precision. Retain the display settings separately. If the rules expressly settle on a rounded figure, that clause changes the question; it should be cited rather than assumed. The relevant evidence is the figure the contract designates, not whichever display happens to be easiest to obtain. A dispute assessment needs the actual specification before it can infer a result. The arithmetic here demonstrates how information can disappear during rounding and why equality deserves explicit treatment. It does not establish that a named platform used the wrong price or manipulated a result. The same distinction is useful whenever a two-outcome proposition turns on a numerical boundary.
The payoff definition does not supply every settlement clause
The joint alert explains that a binary option produces a predetermined cash amount or nothing, depending on the proposition’s outcome, and does not give a right to buy or sell the underlying asset. That definition explains the payoff structure. It does not assign a universal data vendor, decimal precision or equality convention to every contract. SEC and CFTC: Investor Alert — Binary Options and Fraud
WFN calculation: under ordinary nearest-value rounding to four decimal places, the invented values 1.23454 and 1.23446 both display as 1.2345. The first exact value exceeds 1.2345; the second is below it. Identical rounded displays can therefore accompany different comparisons against an exact threshold.
A screenshot can lose the distinction that the rule needs
Suppose an explicitly hypothetical contract pays when a designated observation is strictly greater than 1.2345. Using the first exact value satisfies that invented condition; using the second does not. The result follows from the assumed proposition and exact values. It is not a claim about any real contract, observed market price or actual settlement.
If the hypothetical condition instead says greater than or equal to the threshold, exact equality receives a different treatment. A number shown as 1.2345 after rounding does not establish exact equality. The contract’s comparison rule and its precision rule therefore require separate attention. One cannot be reconstructed merely by reading the other from a short screen label.
The observation source adds another layer. Two data services can display similarly rounded quotes without establishing that they supplied the same underlying observation at the same instant. A settlement record should identify the designated source, timestamp, price field and applicable precision. A screen capture remains useful evidence, but only for the information it actually preserves.
Preserve the exact observation and the applicable terms
For an audit trail, keep the written proposition, threshold, comparison operator, specified observation and source precision. Retain the display settings separately. If the rules expressly settle on a rounded figure, that clause changes the question; it should be cited rather than assumed. The relevant evidence is the figure the contract designates, not whichever display happens to be easiest to obtain.
A dispute assessment needs the actual specification before it can infer a result. The arithmetic here demonstrates how information can disappear during rounding and why equality deserves explicit treatment. It does not establish that a named platform used the wrong price or manipulated a result. The same distinction is useful whenever a two-outcome proposition turns on a numerical boundary.