Posts Tagged ‘what are binary options’
At Binary Options Profits, sometimes we tend to forget that many of our readers are newcomers looking for information on binary options. Some of you are not trading experts, and are just getting started. So if this is your case, this article will show you what binary options actually are. Once you know this, a lot of the material you may have been reading will seem a lot more clear.
Binary options are simple types of options that are relatively risk free. Unlike the normal options and futures the underlying assets is not delivered in a binary option. In binary options the payment is only a fixed amount or nothing at all.
The binary options are somewhat similar to bets. The buyer of the binary put option of an asset pays a small amount of premium and strikes the asset price at a specific value. If the price of the asset goes above the strike value during the time of expiry the buyer gets the amount of binary option. Otherwise he gets nothing and loses the paid amount.
Similarly a buyer of the call option gets the same amount if the price of the asset goes down. Otherwise he gets nothing and loses the paid amount.
Since they have only two outcomes they are called binary options or digital options or all or nothing options. They are a versatile and risk free financial tool that is used for generating income.
They can also be used for hedging purposes. Since it is possible to estimate the possible loss, this is a relatively safe instrument. It gives a trader the opportunity to participate in the price movements of an asset without owning it.