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What Are Binary Options?

Broker of the Month: 24Option »

A form of financial betting that’s easy to understand

So you want to know more about Binary Options, what they are, who they are for and why trade them online. Read on below to find the answers to these questions.

Binary options are an ‘all or nothing’ form of trading online. At its most basic, you are simply predicting whether the price of something will go higher or lower over an extended period of time. It’s pretty simple and it doesn’t matter how much the price fluctuates either way as long as it goes in the right direction of your prediction. If you bet it would go higher and it actually goes higher then, bingo! You win! Equally if you bet the price will go higher but the price drops you lose what you bid. Simple.

A simple example would be:
(Assume that you get 80% profit on your investment)

  1. You decide to trade $200 on an asset, for example Oil.
  2. Now it’s time to decide if the price of oil will go up or down.
  3. You select the time period in which you think it will go up or down in. For example 15 minutes.
  4. Click ‘Buy’, or ‘Trade’ and if after 15 minutes your prediction was right you have just made $160 on top of your initial trade.

Now obviously there are many financial tools available to allow you to make a decision based on market patterns – we are not advising people to go in blind and start bidding as if it was roulette. Whilst there are clear crossovers (as seen in the Insight  ‘Is trading Binary Options a form of gambling?’ ) there are many steps you can take to minimise the risks and binary options trading strategies and tips available for the astute trader.

The returns are fixed and risks clearly stated before each and every trade you make. This means that you know how much you stand to win or lose before you even place your bet, minimising some level of risk. As with anything in life, if you are going to spend money, make sure this is disposable income you are prepared to lose if need be. There are simply no guarantees when trading online.

Variations on binary options

There are a few variations that are emerging that take the same principle of binary options yet allow you to bet in a slightly different way either through betting on the difference between two assets like Pair Options or through eliminating expiry times like Kiko Options. Just beware that these trading instruments vary with each broker offering something slightly different to their customers.

Binary options can also be named Digital Options or Fixed Return Options.

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