What are Binary Options?

What does binary options stand for

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    Let us take them one after the other. Expiry times can be as low as 5 minutes.

    An "option" in the stock market refers to a contract that gives you the right, but not the obligation, to buy or sell a security at a specific price on or before a certain date in the future. If you believe the market is rising, you could purchase a "call," which gives you the right to purchase the security at a what does binary options stand for price through a future date. Doing so means you think the stock will increase in price.

    what does binary options stand for

    If you believe the market is falling, you could purchase a "put," giving you the right to sell the security at a specific price until a future date. This means you are betting that the price will be lower in the future than what it is trading for now. Also called fixed-return options, these have an expiration date and time as well as a predetermined potential return.

    what does binary options stand for

    Binary options can be exercised only on the expiration date. If at expiration the option settles above a certain price, the buyer or seller of the option receives a pre-specified amount of money.

    what does binary options stand for

    Similarly, if the option settles below a certain price, the buyer or seller receives nothing. This requires a known upside gain or downside loss risk assessment. Unlike traditional options, a binary option provides a full payout no matter how far the asset price settles above or below the "strike" or target price.

    what does binary options stand for

    The offer price of a binary options contract is roughly equal to the market's perception of the probability of the event happening. This is why the option, in this case, is so expensive; the perceived risk is much lower.

    The Cup and Handle Pattern Trade Duration To put it into perspective, lets use an example note that all values presented in the example are completely arbitrary and dont represent real prices or returns. Lets say Googles stock price is USD 1, at and you believe it will be lower in However, the stock price commences a slow but seemingly steady rise and its USD 1, atstarting to slowly decline.

    If it's a put option, in-the-money happens when the strike price is above the market price of the stock or other asset. Out-of-the-money would be the opposite when the strike price is above the market price for calls, and below the market price for a put option.

    These are a type of option growing increasingly popular among traders in the commodity and foreign exchange markets. This type of option is useful for traders who believe that the price of an underlying stock will exceed a certain level in the future but who are unsure about the sustainability of the higher price.

    They are also available for purchase on weekends when markets are closed and may offer higher payouts than other binary options.