Binary options (also called ‘all-or-nothing options’, ‘fixed return options’ or ‘digital options’) are easy to understand. Because of its ease of use, this way of investing has become very popular among semi-skilled traders. Through binary options, you can invest in stocks, indices, commodities and foreign exchange. Such a large investment approach has made this method to spread rapidly.
The Binary option works on the principles of a fixed price or a fixed profit if our bet is correct or the loss of investment – if our bet is incorrect. Investors are only required to correctly predict the direction of an asset movement to complete a successful trade (the magnitude of a price movement is completely irrelevant). With binary options there are only two possible outcomes. “Up” or “Down”. Binary options have an expiration time which determines the investor’s profit or loss. Thus an investor will receive a fixed return in case his bet is correct at the expiration date or will lose all investment in case his bet is incorrect.
Binary options allow traders to benefit from price fluctuations in global markets, but it is essential to understand the risk and reward of this controversial system that is often misunderstood by investors. Binary options have little similarity to traditional options as it offers a variety of charges, fees, and risks, and there are also different investment processes.
A binary options trader can buy a “call” when you think that the price of a stock, currency or commodity will increase within a short period, and you can buy a “put” when you think that the price of a product will be reduced within a short period.