Binary options (also refereed to as fixed-return or digital options) are a type of financial instruction with fixed odds that gives the option to bet on the potential movement of an asset. Market assets often traded include commodities (oil and gold), stocks, and indices. The ability to trade with fixed return options has seen a significant increase in popularity in recent years because it is a low-risk and low-cost system to trade.
By trading on the markets with fixed odds, the risk exposed to the investor on a single trade is minimized. This is clearly different to trading on leverage, such as spread betting, or Forex which has much higher risk. For the complete novice to the financial market, the binary options are the preferred and safest place to start.
The type of binary bets can vary with the different platforms offered by the brokers. Investors have the option to use a trading style that matches their preferred trading technique and payout system. Having a basic knowledge of the different binary bets is certain to make it easier to trade successfully in the markets.
Here are four of the different types of binary bets in the market:
High-Low is the preferred trading option for most binary investors. The trading method gives the option to bet on the finishing price of an underlying asset. A trade must finish within a certain price above or below the original figures.
The payout method for the one-touch trading method is achieved if an underlying asset reaches a predicted price at any time during the day’s trade.
The range option is based on the investor predicting a low and high boundary for a proposed trade. A payout is achieved if the underlying asset is able to stay within these price points for the duration of the trading session. This type of trade is related to being able to predict the volatility of the market.
The payout of the target option relates to the market price reaching a specified amount announced by the investor. A target price can be set either high for those that believe the market will be bearish or set at a much higher level in the more bullish trading activity.
The potential payout for the binary options can differ with the different platform options and percentage amounts. A winning option generally receives a payout in the region of 75 to 85 percent.