What is Binary Option for Trader
What is binary option? Binary options, also known as digital options or fixed return options are a relatively new, simple and profitable type of investment. Binary options have been available to trade for a number of years as a semi-official investment product, accessible only to banks and large financial institutions in the over-the-counter market. Since 2008 binary options trading has become available to the public and widely traded online. Its simplicity and high returns make it the simplest method of trading, appealing to anyone with little or no financial knowledge or experience. When trading binary options, investors forecast which direction an underlying asset will move by the time of expiry, rather than actually purchasing the asset itself.
There can only be two outcomes to a binary options trade. A trader either receives a predetermined return if his prediction of price movement is correct at the time of the contract expiry. This outcome is called “in-the-money”. Or, if a reader’s prediction is incorrect at the time of the contract expiry, which is called “out-of-the-money”, a trader loses his investment. And this is also What is binary option question.
In rare cases, there is also an “at-the-money” scenario that means an option’s strike price is identical to the price of the underlying asset at the time of the contract expiry. In this situation the investment is returned without profit or loss.
The predetermined return on a binary options contract can be anything from 75-85% and a trader can choose from a variety of assets, such as stocks, currencies, commodities and Indices.
The expiry time of a contract can be anywhere between 30 seconds and one month.
One of the greatest advantages of binary options trading is that both the return and the expiry time are known in advance that makes decision making process relatively simple.
Transactions occur through a secure online connection, and traders can get started right after opening an account and depositing funds.