Binary options trading
Binary Options (or digital options) have been listed on the Chicago Board of Options Exchange (CBOE) since July 2008. Before that date, binary options were actively traded by institutional investors and major investment banks on the OTC (over the counter market). Today, brokers and market makers feature platforms which allow individual investors and professional traders to trade binary options.
The thing that makes binary options attractive is their ease of use. The trader must just choose whether the market value of the underlying asset will be above or below the exercise price at the end of a period of time defined in advance (end of day, week, one hour or even 15 minutes). With binary options, atrader can receive a return on his investment in the short term based on small movements within the financial markets (stocks, commodities, currencies and indices). With binary options, risk is limited because the profit or loss will be defined in advance and it cannot change.
The different types of binary options
For each type of option, the exercise price of the underlying asset is determined when placing the order; this is the strike price. Next, the trader chooses how much he wants to invest and one of the two possibilities offered by the option he has chosen.
If the investor was right when the contract expires, he earns a profit defined in advance as a percentage of the amount he invested. If he is wrong, he loses some or all of this investment.
Cash or nothing - High Low
High: to bet on a price rise with a "buy" option, the market price will therefore need to be above the strike price when the option expires.
Low: to bet on a price decline with a "sell" option, the market price will therefore need to be below the strike price when the option expires.
Choose the market direction, enter an amount and buy:
Touch
Touch: the trader predicts that the price will reach the target price at least once before the option expires.
No Touch: the trader predicts that the price will not reach the target price before the option expires.
Decide whether price will touch the target price, enter an amount and buy:
Boundary - Range - Limit - Zone
In: the trader predicts that the market price will be within the upper and lower limits of the target area when the option expires.
Out: the trader predicts that the market price will be outside of the upper and lower limits of the target area when the option expires.
Decide whether price will remain within the boundaries or not, enter an amount and buy:
