What Exactly are Binary Options? The reason why Binary Options are 'Binary' is because trading binary options leads to only two possible outcomes; Winning a specific fixed amount of money or losing it all. Like, Binary options comes with and as well. When you buy Binary Call Options, you win a specific amount of money when the underlying asset ends up higher than the () upon expiration and when you buy Binary Put options, you win a specific amount of money when the underlying asset end up lower than the upon expiration.

The concept of trading binary options is quite straightforward. As a trader, you don’t have to make lots of choices. Your task as an options trader is to simply choose whether you are going to bet your funds on a Put Option or a Call Option. A call option within the world of binary options is a prediction that indicates a belief that the price of an asset is bound to increase. With this type of trade, it doesn’t matter how much the increase happens to be—it can even be a fraction of a penny.

You lose it all (or a fixed amount) if the stock does not. In terms of ending up by expiration, Binary Options are exactly like Plain Vanilla Options which simply expire out of the money and you lose your entire investment in the position. However, you can actually win varying amount of money when plain vanilla options end up in the money by expiration depending on how much in the money it moved while you can only win a fixed amount of money buying Binary Options. This is why there are only two fixed outcomes for Binary Options.

In essence, buying Binary Options is placing a bet on whether the underlying asset would be higher or lower than its strike price by expiration. This is also why Binary options are usually offered at the money with a 50/50 chance of ending up either way. Binary Call Options Binary Call Options are Binary Options betting on the price of the underlying asset rising above the strike price. Like normal call options, they are bought when you are bullish on the underlying asset.

Buying Binary Call Options pays you a fixed return when the underlying asset ends up higher than the strike price upon expiration. Returns are usually expressed as a percentage of the original investment. The concept of binary. If the underlying asset finishes lower than the strike price, you lose your entire investment in the position or a certain percentage of it. Binary Call Options example Assuming you bought $1000 worth of Binary call options on AAPL with strike price of $200, payout of 70% and risk of 100%. If AAPL ends up higher than $200 by expiration, you will make a profit of $1000 x 70% = $700 If AAPL ends up lower than $200 by expiration, you will lose your entire investment of $1000 There are two kinds of Binary Call Options; Cash-Or-Nothing Call and Asset-Or-Nothing Call. Cash-Or-Nothing call returns a fixed return in cash while Asset-or-Nothing call returns a profit equal to the price of the underlying asset. Binary options trading signals software.