What Are Binary Options?

Don’t be scared,  the name may sound difficult, but binary options are perhaps a simpler way to trade than traditional options or currencies.

Binary options, just like traditional options have a premium, a strike price and an expiration.

The difference between binary options and traditional options.

Binary options, the “premium” amount for the choice is chosen by the trade (usually determined by the market with traditional options) and the expiration time frames are much shorter.

Traditional options have an expiration range from a week to a couple of years.  Whereas binary options have an expiration period of less than a minute to a few days.

These differences bring about the largest difference, that is how a profitable trade is calculated. However, before we talk about earning money, let’s check out at how binary option trades work.

By way of a binary option trade, the broker will pay out a percentage of the premium at risk if the conditions of the contract are met,  for instance, the market price is at or further than your target strike at expiration with a call option.

Essentially, you get a specified fixed profit, regardless of how far the market moves further than the strike price or met the conditions of the agreement.

Whether it’s by 1 pip or 1,000 pips, it is the same profit payout at contract expiration, there is no middle ground. This is why binary options are also known as “all-or-nothing” options.

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