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Introduction To Binary Options
What is a Binary Option?
A binary option is a trade with two possible outcomes, based on an asset, where the price, expiration, and payout are fixed at the start of the contract.
What is an asset?
An asset is the stock, currency, index or commodity on which the option contract is based. (example: the EUR/USD (the Euro and US dollar)) can act as the asset for an option.
What is a Hi (up) option?
A Hi option earns you a profit when the asset price at expiry time is higher than the purchase price. For Ex: If you buy Google (GOOG) at 618.48 at 10:00 AM and choose that it will be higher than 618.48 at 11:00 AM. If it is higher than 618.48 at 11:00 AM - you have made a profit.
What is a Low (down) option?
A Low option earns you a profit when the asset price at expiry time is lower then the purchase price. For Ex: If you buy Google (GOOG) at 618.48 at 10:00 AM and choose that it will be lower than 618.48 at 11:00 AM. If it is lower than 618.48 at 11:00 AM - you have made a profit.
What is out-of-the-money?
In the case of a 'Hi' option out-of-the-money means that the asset price closed below the purchase price. A 'Low' option is out-of-the-money when the asset price closes above the purchase price. A 'Hi' or 'Low' option that is out-of-the-money will result in a loss to the trader.
What is in-the-money?
In-the-money means that in the case of a 'Hi' option the asset price closed above the purchase price. A 'Low' option finishes In-the-money when the asset price closes below the purchase price. A 'Hi' or 'Low' option that is in-the-money will earn the trader a profit.
What is at-the-money?
At-the-money is when the asset price closes at the same price it was purchased. In this case, the full purchase amount will be returned to you.
What is the expiry time?
The expiry time is the pre-determined time that an option ends with the result of in-the-money or out of-the-money.
What is the expiry date?
The expiry time is the pre-determined date that an option closes with the result of in-the-money or out of-the-money.
