What are binary options
Binary options, a.k.a 'all-or-nothing options' or 'digital options', are a type of option that either pay a fixed amount of compensation when the option expires in the money, or nothing when the option expires out of the money.
For example, suppose you think Facebook stock will fall below $20 in the next hour. You open a High/Low option that pays you an 80 percent profit if you're right. If the stock does not trade below $20 after the hour expires, you receive nothing.
Different kinds of binary options
There are several forms of binary options. The High/Low option (used in the above example), the One Touch option, the Boundary and the 60 Seconds option.
The High/Low option is about predicting whether the price of a stock/currency/commodity is above or below a specific price when the option expires.
The One Touch option is about predicting whether the price will touch a specific price yes or no within a specific time period.
The Boundary trade, also In/Out trade or Tunnel trade, is about predicting whether the price will be located in or out a specific range when the option expires.
The 60 seconds option is about predicting where the price will be in 60 seconds.
What can you trade in binary options
Most binary options brokers offer a wide range of products you can trade in binary options. At Zoneoptions for instance, you can trade in forex, stocks, commodities and indices. Stocks include companies like Google, Apple, Fiat and Tata Motors, commodities include oil, gold and copper.
Why trade binary options
Trading binary options is fast, dynamic and exciting. It can be highly profitable if you know what you're doing. Some traders also prefer having to predict whether or not an asset will touch a specific price or stays within a predetermined range, as opposed to longer term trend trading or having to set stop losses and profit targets.
One of the convenient things about binary options is that you don't have to worry about stop losses and profit targets. Altough you can sometimes close an option before the expiration time, most binary option traders seem to be more comfortable with 'setting and forgetting' a binary option trade.
In short, if you are ready for simple yes or no predictions, binary options trading might be just the ticket for you.