What are Binary Options?

What are Binary Options?

What are Binary Options? Binary Options are an new way to trade by predicting the market price direction (up / down) of currencies, stocks, commodities and indices over a time-frame (starting from 30 seconds) selected by the trader. Binary Options are simple and can have only two possible outcomes: either the option expires in the money (you won the prediction) or out of the money (your prediction was wrong). The potential payout for each outcome is known when entering a trade, making Binary Options ideal for short term trading (starting from 30 seconds).

Trading Binary Options has many advantages, among them the option to close a trade before the expiry, automatic sell of trades by Trade Control – giving the trader the ability to set the expiry time of the option – and a wide selection of visual trading tools.

Binary Option Trading Example

You open a $100 60 minute trade on the EUR/USD predicting the price will go up. The return on this option was 85%. If the option expires In the Money, your prediction is correct. If the option expires Out of the Money, your prediction was wrong and there is no return.

  • If the EUR/USD went up, meaning the price of EUR/USD at the expiry is higher than the price when you opened the trade, your option has expired “In the Money” and your payout is $1800. Your investment is $100 and $80 is your profit (80%*100).
  • If the EUR/USD went down, your option will expire “Out of the Money” and you will not receive a payout.
  • Important – for many options, the binary options brokers enables the closure of the position before the expiry.

What are the Benefits of Binary Option for Traders

Trading in Binary Options offers significant benefits to the trader, including controlled risk with trend profit and no commissions or hidden costs.

  • Controlled Risk – payout is known when entering a trade, no margin calls or leverage.
  • Intuitive and simple – appealing to every trader.
  • Profit Profile – small movement can bring high returns, unlike traditional trading.
  • Choice – variety of markets, currencies, commodities.
  • Trading Style – from short term to long term, the trader defines the period.
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One Response to “What are Binary Options?”

  1. Thank you. Impressive well written article on binary options. Information and education is key to trading and you have hit the nail on the head here.. keep up the great work always enjoy your articles.

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