What Are Binary Options ?
Binary Options are predictions on how a certain product will do over a certain period of time. With binaries, a trader will attempt to successfully forecast the future price of a particular product. Unlike traditional FX and CFD trading, binary options have only two possible outcomes: either the event occurs by a certain time or it does not. One can think of a binary as an event with two outcomes: one being “yes” in that the outcome was as predicted, the other “no” meaning the outcome was not as predicted. The word ‘binary’ itself means ‘involving’ two, which for binary options refers to the two possibilities. A binary option yields a fixed amount or nothing at all. For example, a trader invests a fixed amount of funds on a binary option; if that option is successful the trader makes a fixed amount of profit, if the option is unsuccessful the trader only loses his invested amount, thus making binary option investing a straightforward investment product. Thus, on any Binary trade you cannot lose more than the amount you invested on the particular trade. The profit if successful is usually a certain percentage of your trade amount. Trading Binary Options is a straightforward, and quick way to invest into the capital markets.
Components of a Binary Option
A binary option doesn’t have as many components as a typical FX or CFD trade; there is no stop-loss, take-profit or stop-out. The simplicity of a binary option is one of its most attractive features. The major terms that you need to be familiar with are listed below. Once you have read these, it’s highly advisable that you visit our types of binary section where you can learn how these terms are applied to our product selection. Additionally, here you can find real trading examples.
This is the maximum amount that you are prepared to lose, you can think of it as your margin requirement. In the event of a successful binary option, the profit percentage is multiplied by this sum to determine your profit.
This is always given as a percentage. The payout percentage is the return you get on your initial investment in the event of you successfully predicting the outcome of a given event. For example; say you invest $100 and you successfully predict the event, the options payout is 70% to 90% of your initial investment, plus your initial stake is returned.p>
Time Left to Place Option
This will always be less than the option expiry. This allows us to accurately price the option, and we only allow you to enter an option that has a sufficient amount of ‘time to expiry’ remaining. The ‘Time Left to Place Option’ is the time which you can take a new position on the available option.
This is the time in which the option time reaches zero, and the binary option is closed and settled.
If you think the outcome will result in a positive price movement, you would select this option.
If you think the outcome will result in a negative price movement, you would select this option.