Binary option is a type of trading in which the outcome can take only two possibilities, Up or Down, such outcome is fixed to a pre-defined amount (predefined quantity or units of some asset) where you can gain the pre-defined amount or nothing at all.
Also called fixed-return options, these have an expiration date and also a “winning percentage of the trade price.” It’s the price at which a stock can be exercised by a specific date. It will be stated in the binary option contract.
Binary options are generally easier to trade because they require only to determine the direction of the price movement of the stock. No actual stocks are ever bought or sold, so the selling of shares and stop-losses are not part of the process.
The two main types of binary options are the (gain or nothing) binary option, this pays some fixed amount of cash if the option expires in-the-money and the (asset or nothing) binary option, which pays the value of the underlying security.
with binary options you cannot lose more than what you invested in the option
With binary options trading, (CALL or PUT) you simply select the direction the underlying security is likely to go (Up or Down), select the option expiry date and invest in the option. If the price of the security moves in the direction of your option you get paid a fixed return. In the event that the price of the security moves in the opposite direction you lose the amount invested in the option. (Gain or Nothing)
Binary Options CALL & Put terms
For a call option, in-the money happens when the option’s strike price is below the market price of the asset or stock.
If it’s a put option, in-the-money happens when the strike price is above the market price of the asset or stock.
For a call option, out-of-the-money would be when the strike price is above the market price
For a put option, out-of-the-money would be when the strike price is below the market price
Binary Option Articles
CALL or PUT (Up or Down)
|Buyers Right to buy stock||Buyers Right to sell stock|
When trading binary options, there are two basic trades one can make. CALL or PUT. You would buy a CALL (Up) option when you believe that the price of the underlying security will go up in value before expiry time. Likewise, you would buy a PUT (Down) option when you believe that the price of the underlying security will drop in value before expiry time.
Making money (or lose your investment) is determined by the option expiry time. Options are available at various expiry times. The shortest option expiry time is 60 seconds, other options come with a weekly, daily or monthly expiry date