What Is a Binary Option?
A binary option is a financial product where the parties involved in the transaction are assigned one of two outcomes based on whether the option expires in the money. Binary options depend on the outcome of a "yes or no" proposition, hence the name "binary." Traders receive a payout if the binary option expires in the money and incur a loss if it expires
 |
| Binary Option trading Definition |
A binary option may be as simple as whether the share price of ABC will be above $25 on April 22, 2021, at 10:45 a.m. The trader makes a decision, either yes (it will be higher) or no (it will be lower).
Let's say the trader thinks the price will be trading above $25 on that date and time and is willing to stake $100 on the trade. If ABC shares trade above $25 at that date and time, the trader receives a payout per the terms agreed. For example, if the payout was 70%, the binary broker credits the trader's account with $70.
If the price trades below $25 at that date and time, the trader was wrong and loses their $100 investment in the trade.
