Binary options, also known as all or nothing options, digital options or fixed returns option is a well-known trading instrument where a person can earn or gain fixed return on an investment through online trading. Trading through binary options is mainly based on logic. Binary options allow you to choose from two selections, either up or down. When you choose the up option, for instance, the asset in question is the price of gasoline; if your anticipation is that the price of gasoline will go higher than what it is currently you will choose up, if you choose the down option, your anticipation is that the price will go down. You can set a time limit on these “predictions” this means you can keep your option for an hour, a day or even a month. If your “predictions” are right on, you can earn up to sixty-five to seventy percent of the amounts of your investment. If the option you chose is wrong, you can lose up to 85 percent of your investment.
The good thing about binary options is your risks are well-defined since the amount of money you place in an asset or instrument is at your own discretion. Binary Options give you two variants, put and call options. In Put Option, this means that the contract purchased by a trader or investor is through an asset, and this asset can be sold (or not) by the trader at a predetermined time. In Call Option the contract allows the trader or investor to buy in a quantity the instrument in question, this means that the trader is able to have the security from the writer of the instrument.
Types of Binary Options
1. One Touch – This type of binary option allows the trader to get a payout once the trigger reached or touched predicted rate of the trader. This means that the trader only gets a payout once his “predictions” get fulfilled by the rate of an instrument at a specified time, when the specified time comes and the rate of the said instrument does not reach the rate the trader predicted, the trader only gets refunded fifteen percent of his investment.
2. No Touch – This type of binary option means that the investor will only get a pay out if the rate of the instrument does not touch the trigger at a certain period of time.
3. Double one touch – There will be two triggers in this type of binary options one pointing the rate of an instrument down and one pointing up. When either of these triggers is hit at a certain period of time the trader gets a payout, if not he loses up to 85 percent of his investment.
4. Double no touch – The complete opposite of the Double one touch, When either of the triggers were not hit at a certain period of time the trader gets a payout.
If the traders’ predictions are right, the trader has the option to choose from different payout types. If the trader chooses cash or nothing, the traders’ payout is in cash if his “prediction” is correct. If the traders’ “prediction” is incorrect he can lose up to 85% of his investment. When the trader chooses the asset or nothing payout type, the traders’ payout is in security or an asset, just like cash or nothing if the prediction is right he gets the pay out in form of an asset or nothing if he is wrong. There are also two trading styles a trader can choose from.One of which is the American style. In this trading style, the trader has the option to take the payout once the rate of an instrument reached or hits the trigger. If he chooses the European style, he knows that when the rate of the instrument reaches the trigger before the time expires he will lose everything.