Intraday trading occurs between the opening and closing bells of a single day's trading on an exchange. Different exchanges have different schedules; for instance the New York Stock Exchange opens at 9:30 AM and closes at 4 PM. Day traders of options open and close positions frequently throughout the trading day, even though they have the right to hold an option until expiration, which could be months away. However, certain options are designed with very short expiration periods, and are used exclusively for intraday trading. The foreign exchange (Forex) market is a good example of one in which intraday options are traded.
An option is the right, but not the obligation, to buy (using calls) or sell (using puts) an underlying asset at a specified price (the strike price) by a specified time (expiration). The price of put or call is its premium. When you buy an option you pay a premium and have a long position; option sellers, also called writers, collect a premium and have a short position. Call buys and put sellers are bullish (optimistic) about the future market price of the underlying asset, whereas call sellers and put buys are bearish (pessimistic).
All options have an expiration date and time that are standardized by the exchange on which they trade. Existing positions in American-style options can be bought and sold at any time up to expiration. By contrast, European-style options must be held until expiration, and thus are not appropriate for intraday trading if their expiration is more than a day away. Forex options trade American-style. The North American Derivatives Exchange (Nadex) markets intraday options with expiration periods as short as two hours.
A Forex binary option is a bet that the price of a currency will achieve a certain value at expiration, which can be in as little as four hours. The payoff is always $100 per contract if your prediction is correct. The premium is a function of time remaining and strike price, and typically ranges from $15 to $50 per contract. If you buy a binary option, the most you can lose is the premium. If you sell a binary option, your maximum loss is $100 minus the option premium.
Nadex markets a bull spread contract with expiration as short as two hours. The spread contract consists of two calls with identical expirations but different strike prices. The lower-strike call is purchased and the higher strike is sold, thereby creating a floor and ceiling (maximum loss and gain) for the contract. If you are bullish on the currency, you buy the bull spread; bears sell the bull spread. The actual loss or gain, circumscribed by the floor and ceiling, is equal to $1 per minimum price change in the currency, typically measured to four decimal places of precision. For example, the EUR/USD (long euro/short U.S. dollar) currency pair might be priced at 1.3047. A move to 1.3048 would yield a $1 per contract gain or loss.