A market proposition will always settle at either $0.00 or $10.00. All shares are bought or sold at prices somewhere in between these two price points. The price at which you buy or short sell shares will determine how much you can win, and how much you can lose.
- You buy shares at a price of $7.00. If the market settles at $10.00 then you have a profit $3.00 per share. If the market settles at $0.00 then your loss is $7.00 per share.
- You short sell shares at $4.50. If the market settles at $10.00 then you lose $5.50 per share. If the market settles at $0.00 then you have a profit of $4.50 per share.
You don't have to wait until the market is settled before you win or lose money - you can exit your position early to take a smaller profit or to limit a potential loss.