A binary option, or asset-or-nothing option, is type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money , or nothing at all if the option expires out of the money.

A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset. Binary options are significantly different from vanilla options. Plain vanilla options are a normal type of option that does not include any special features.

A plain vanilla option gives the holder the right to buy or sell an underlying asset at a specified price on the expiration date, which is also known as a plain vanilla European option.

Binary Option

While a binary option has special features and conditions, as stated previously. Binary options are occasionally traded on platforms regulated by the Securities and Exchange Commission SEC and other regulatory agencies, but are most likely traded over the Internet on platforms existing outside of regulations.

Because these platforms operate outside of regulations, investors are at greater risk of fraud. Conversely, vanilla options are typically regulated and traded on major exchanges.

For example, a binary options trading platform may require the investor to deposit a sum of money to purchase the option. If the option expires out-of-the-money, meaning the investor chose the wrong proposition, the trading platform may take the entire sum of deposited money with no refund provided. An investor is bullish and feels that the economic data being released at 8: Dictionary Term Of The Day.

3 Ways to Understand Binary Options - wikiHow

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Binary Options - Binary Option Definition, Trading Examples

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