In finance, a
binary option is a type of
option in which the payoff can take only two possible outcomes, either some fixed monetary amount of some asset
or nothing at all (in contrast to ordinary financial options that
typically have a continuous spectrum of payoff). The two main types of
binary options are the cash-or-nothing binary option and the
asset-or-nothing binary option. The cash-or-nothing binary option pays
some fixed amount of cash if the option expires in-the-money while the
asset-or-nothing pays the value of the underlying security. They are
also called
all-or-nothing options,
digital options (more common in forex/interest rate markets)
When buying a binary option the potential return it offers is certain
and known before the purchase is made. Binary options can be bought on
virtually any financial product and can be bought in both directions of
trade either by buying a “Call”/“Up” option or a “Put”/“Down” option.
Binary options are offered against a fixed expiry time.
Risk Warning:
TRADING COMMODITY FUTURES, OPTIONS, CFD’s SPREAD BETTING AND FOREIGN
EXCHANGE ("FOREX") INVOLVES HIGH RISKS AND CAN CAUSE YOU A COMPLETE LOSS
OF YOUR FUNDS.
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