Binary Options
What is Binary Options?
A binary option is a type of derivative option where a trader makes a bet on the price movement of an underlying asset in near future for a fixed amount. Dictionary meaning of ‘binary’ suggests where a moment involves two or composed of two, in simple terms it can be expressed as true/false, yes/no or 0, 1 i.e. there are two outcomes. Similarly in binary option a trader has to bet on any one out of two options ‘buy/sell’ basis two definite outcomes whether an underlying asset price will rise or fall in the near future, for which a trader will earn fixed amount if bet worked in his favor. These are important elements to any binary option:
1) Cash settled
2) Put/call option 3) Expiry Date 4) Underlying Asset and its price 5) Settlement Price Advantages of Binary Options:
Simplicity -Trading with binary options is literally just a click away.
Accessibility- Since it’s online, you can trade from any internet connected device. With mobile apps provided by brokers, you can trade on the go.
Control- Even before you make your first trade, you already know the possible outcomes. The risk and rewards are known so you have better grasp of your next move.
Convenience-No need to be bogged down by details such as exiting trades, putting orders, monitoring positions, and the like; your broker and trading app can take care of that.
Hassle-free-There are no liquidity concerns since you do not own underlying assets which allows your broker to offer numerous strike prices and timeframes, giving you lots of trading options.
No commissions or fees- Brokers generally do not charge commissions or fees for winning trades.