Binary options are a versatile and relatively riskless financial instrument that is suitable for anyone having a minimum knowledge about financial markets. In a binary option no underlying asset is transferred but only a fixed amount or nothing. There are many advantages for binary options that make it suitable for almost all traders. The main advantage of binary options over other financial instruments is their simplicity. The buyer of a binary option of a stock doesn’t have to own the asset in binary options. Thus he doesn’t need to know the details of the stock. To do trade a binary option he just need to know the direction in which the price is likely to move.
Limited risk is the other main quality of the binary options. This is because the possible gain or loss could be easily estimated before the trade. If the price goes down below the strike price the buyer losses only the small premium paid by him. Otherwise he gains the amount of the option. Binary options give a trader the opportunity to profit from the price fluctuations of a stock without buying it. An investor can also use binaries as a hedging tool to protect his assets from possible price fluctuations.