What are binary options (digital options)?

Posted by Shawn on Thursday, February 12, 2009 · Leave a Comment 

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http://tradesmarter.com/2009/03/what-are-binary-options/

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Binary options – also known as digital options or fixed return options are sort of a hybrid between traditional options and fixed-return financial instruments. Digital options are simple, and they are ideal for the trader who wants the potential for significant, short-term gains with a strictly limited risk. This means the investor who trade binary options can know immediately and exactly how much a trade will yield or lose. A binary option allows you to form an opinion on whether a specific outcome will or will not occur. They can only have one of two possible outcomes. Unlike a spread bet a digital option does not require margin, no stops and you know the exact maximum risk and maximum profit. Binary Options trading allow you to take a simple “Yes or No” approach ( or Above/Below) on whether an outcome will occur. For example, will the GOOGLE close up on the day at the expiry time? If “Yes,” the Binary option settles "in the money" If “No,” the Binary option settles "out of the money".

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