What are binary options?

Binary options have indeed revolutionized the options trading market and managed to extend trading with options to a very wide range of target groups. If you have ever tried to trade classical options, you know that it’s very difficult for an inexperienced person. At broker platforms like flatex, which is for example very suitable for buying and selling of stocks, you can trade options only after you prove that you have the required experience. If you are only a beginner, this is of course a problem. Therefore, there are many brokers which simplify trading with options–namely with binary options. The worldwide known broker is Anyoption.

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Peculiarities of binary options

Now we should answer the actual question: what are binary options and how do they differ from simple options. In case of binary options, only two types of payouts are possible which are specified beforehand. That means if you buy a Call option for 1000 Euro, at 70% payout, you get 700 Euro, or you lose all the money you invested or in a few cases, can get only a little percentage, for example 10% as a payout.

In this case, one would earn 100 Euro from 1000 Euro. An alternative to this is to make 1000 Euro to 1700 Euro. So, it’s a kind of all or nothing play. It is actually the case for all options, because in the case of a normal option, the option expires as valueless or you can redeem them profitably. The only difference is that in this case the profit is not predetermined, but it depends on the rate on the expiration date. The binary options are also different with respect to runtime. In a standardized online trading, they are fixed to one hour. That means, you buy options at a rate for the next hour.

Advantages of binary options

The advantages of binary options are actually very clear: they are very easily understood and operated. It is practically not possible that you make a false decision, which can happen very easily in case of normal options and this can be really very expensive! With binary options, you cannot risk more than your investment. When you buy an option for 100 Euro, you cannot lose more than 100 Euro. But if you go short with a real option and the market goes in the wrong direction you can really lose a lot of money.