Broadly, a binary option is a financial option in which the payout is either a fixed amount or nothing at all. It is not related to how much a stock or commodity goes up on the market. There are both cash-or-nothing binary options and asset-or-nothing binary options. Cah-or-nothing options pays a fixed amount of cash if the option ends up in-the-money, while asset-or-nothing options pay the money of the underlying security.

Betting or Trading?

Although binary options are called trading, they are often considered a form of financial betting. You bet on whether the asset will go up or down in the future, and if you are right you win a fixed amount, but if you are wrong you win nothing. This is different to spread betting, in which you bet a certain value per point, and your returns are based on how many points the asset has gone up by. It is a very quick and easy form of financial betting. Before placing your bet, you know exactly how much you stand to gain from it. If you’ve got the smarts to be able to predict whether an asset will go up or down, but don’t want to spend lots of time calculating amounts based on asset price, binary options are for you.

Many Options of Binary Option

There are actually several different kinds of binary options to choose from. The simplest and most common kind is the up/down, high/low option. Here, you simply bet on whether a price will finish higher or lower than the current price at the time of expiry. Another kind is the in/out, range, or boundary bet. Here, a “high” figure and a “low” figure is set and you predict whether the price will finish within or outside of these boundaries. Lastly, with touch/no touch options, you simply bet on whether a price will “touch” a certain level between the time of the trade and expiry – if it does, you get your payout, it doesn’t matter whether the asset finishes there or not.

How Do I Do It?

So how does it work? Well, since it is not technically a form of gambling, you do not place your bets through a gambling website. Instead, you need to open a broker amount. Don’t worry, you don’t need to be a professional trader to do this. If you are new to binary options, you can open a “demo account” with several different brokers. This way, you can try out several different platforms and see what the trading experience is like before you even deposit any real money!

Once you’ve chosen your broker, you need to select the asset or market you want to trade. There are a huge number of choices here – this is where your finance smarts need to kick in. Next, select the expiry time, and the size of the trade. Remember, 100% of your deposit is at risk, so choose wisely. Once you’ve made all these decisions, you can place your bet. Good luck! Now it’s up to the market.