Binary options

Dmitry
Khlestkin

A binary option is a type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes/no proposition, hence “binary”. A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset. Betting on a binary option takes place on a special floor, which only some bookmakers have.

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Option – this is a contract by which the buyer of the option has the right, but does not necessarily have to complete the purchase or sale of a particular asset, at a price which has been predetermined in a contract that is at a fixed time in the future, or over a certain period of time.

In order to make money on binary options, one needs to determine whether the price of an asset will rise or fall during the set period. This is because assets are shares, securities, index, commodities or currency pairs, which may conclude fixed term contracts.

Speaking in simple terms, the essence of earning money on binary options is down to ones ability to make a prediction in respect to the quotations on the exchange of assets. This is exactly the same in sport, only one does not need to bet on the sporting event, but on growth or fall in the share price, securities, index, commodities or currency pairs.

During the process of forecasting, it is possible not only to choose how the price of an asset will alter, but also choose the sum, which may or may not reach the price of the asset, as well as the corridor within which the price of an asset will move during the timeframe of the option.

There are three main types of binary options.

  1. Call/Put options – here, the direction of the price movement relative to the price at the time of the purchase of the option during the term of its validity is predicted. If the person believes the price will grow, then buy a ‘Call option.’ However, if the person thinks that the price will fall, it is of course better to buy the ‘Put option.’
  2. One Touch/No Touch options – these options are projected to a achieve a certain level of value ‘One Touch,’ or on the contrary, will fail to reach a certain price ‘No Touch,’ by the time the option expires. Once the price reaches the selected point, it does not matter which way the price moves.
  3. In/Out Options – these options are projected within a corridor where the price will move will move up until the moment when the option is completed ‘In Option’ or when the prices leaves the corridor ‘Out Option.’

William Hill is among the major online bookmaking firms who offer binary options.

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