A binary option is a type of Option where the payoff is either some fixed amount of some asset or nothing at all. The two main types of binary options are the cash-or-nothing binary option and the asset-or-nothing binary option. The former pays off a fixed amount of cash if the option expires in-the-money while the latter pays off the value of the underlying asset.
How do binary options work in stock trading?
- Select the underlying asset you wish to trade (a stock, commodity, currency etc).
- Enter your investment amount. This is how much you’re willing to risk.
- Select ‘Call’ if you think the price will rise or ‘Put’ if you think the price will fall.
- Place the trade and wait for the expiry time to see if you’ve made a profit.