Binary Options, sometimes called digital or fixed return options, are a simplified yet exciting method of trading the financial markets, based on a determination of whether the price of an asset will close ABOVE or BELOW the current price within a set time period. If our prediction is correct we profit on the trade and earn up to 85% of the value of the trade.
There are a few basic considerations to binary options trading: the asset to trade, the direction of the price at the option expiration time relative to current price, and the trading value. If we believe the price of the asset will close ABOVE current price at expiry, we want to buy a CALL option. If we believe the price of the asset will close BELOW the current price at expiry, we want to buy a PUT option . As a trader we determine the value which we want to place on any given trade, whether it is $50, $100, $500 or any other value depending on our confidence level and risk tolerance. If our speculation is correct, we are “in-the-money”. If the market moves in the opposite direction from our prediction, we are “out-of-the-money”. If the asset price on our option closes at the exact same levels, we are “at-the-money” and receive our original trading value back with neither profit nor loss.