What is binary option?

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A binary option, or digital option, is a financial instrument that allows traders to bet on the direction of an asset’s price over a fixed period of time. Binary options are typically priced at $0-$100 per contract, and payout rates can be as high as 85% depending on the broker.

 

Unlike traditional options contracts which require the holder to exercise their right by buying or selling the underlying asset, binary options contracts expire automatically after a set period of time. This feature makes them attractive to traders who want to take quick profits without having to worry about margin calls or stop losses.

 

What is the first thing that comes to your mind when you hear the word “trading”? – It’s probably numbers, constantly changing indices, quotes and profit which is extremely hard to calculate. Another word for it is “complex”.

 

And it was, until binary options came to market. You don’t have to be an expert in economics to trade profitably in binary options. As it is a form of investing, it is obviously still not a piece of cake – you’ll need to spend some time learning how it works and how to make accurate predictions in order to be able to make substantial profit. However, the process itself is much easier than, let’s say, Forex.

 

Most forms of trading imply that an investor is actually buying an asset and his profits or losses depend on the changing value of the asset over various periods of time. In Binary Options, on the other hand, no real product is bought.

 

Basics of binary options are fairly simple: based on market tendencies and some other factors, a trader makes prediction about movement of prices of various assets, which most commonly are currency pairs, precious metals and stock.