What are Binary Options?

Binary Options allow investors to speculate the price movement of their underlying assets such as stock, index, commodities or currency pairs (FX). Binary Options are different from other financial instruments because they have a fixed payoff at their expiration. This means that the traders know from the beginning the amount they may earn or lose. And this is the reason they are called Binary Options. Because they can only have two possible payoffs. A positive and a negative!
It doesn’t matter if the underlying asset price is one cent over the strike price or if it is one dollar over the strike price!! The binary option contract payoff is the same.

Binary Call Options Binary call options gain value when the underlying security is trading at more than the strike price at expiration. Select “Call” to predict that the underlying asset will exceed the option’s strike price at expiration.
Binary Put Options Binary put options gain value when the underlying security is trading at less than the strike price at expiration. Select “Put” to predict that the underlying asset will fall below the option’s strike price at expiration.
Main Characteristics Derivative Financial Instruments Binary Options are derivative Financial Instruments – their price is dependent upon or derived from one or more underlying securities.
Underlying Assets Yardoption offers Binary Options on a variety of underlining assets like stocks, commodities, indices and currency pairs. Remember that no underlying asset is owned; it is simply a speculation on an underlying asset’s direction.
No Delivery The trader has no rights or obligations in respect to the Underlying Assets relating to Binary Options. There is no delivery of the Underlying Asset. The payoff is cash settled.
Call Or Put Positions Binary Option positions can be Call or Put. If a trader believes the market is rising, she/he would purchase a “call .” If the trader believes the market is falling, she/he would buy a “put .” For a call to make money, the price must be above the strike price at the expiry time. For a put to make money, the price must be below the strike price at the expiry time. If a trader wagers correctly on the market’s direction and the price at the time of expiry is on the correct side of the strike price, the trader is paid a fixed return regardless of how much the instrument moved. A trader who wagers incorrectly on the market’s direction loses her/his investment.
Strike Price, TargetPrice, Expiry Time, Payoff The strike and target prices as well as the expiry time and payoff are all disclosed at the trade’s outset through the 24option trading platform.

  • Payoff -The amount of money earned or loosed from a trade.
  • Expiration (Expiry Time) – It refers to the time and date, at which the value of the underlying asset is judged against the strike price to determine payoff. At expiration, the Binary Option becomes void and ceases to trade.
  • Strike Price – The strike price is determined by the price of the underlying asset at the moment at which the option is purchased.

For any given Binary Option, Yardoption will quote one price at which the Client can open an order. Yardoption will quote to clients the price provided by the Execution Venue. The Execution Venues calculates and provide their own tradable prices for a given Binary Option by reference to the BID and ASK prices of the relevant underlying asset, which the Execution Venues obtain from a reputable third party external reference sources (i.e. price feeders). Please Click Here for more information. For the majority of the Binary Options, the Strike Price is the same as the Target Price. Note: The prices quoted by the Company for the Binary Options are different from the prices of the underlying assets.

  • Expiry Price – Expiry price refers to the price when an option will close and is used to determine whether the option closed in or out of the money.
  • Target Price – Target Price is the price which the trader projects that the Binary Option will reach.
Over The Counter Binary Options offered by the Company are off-exchange transactions (i.e. over-the-counter). The trading conditions are set by us. The Company is your contractual counterparty for every Binary Option contract you enter into. Subsequently, we shall enter into a contractual counterparty relationship with an Execution Venue to execute your Orders on your behalf. The list of Execution Venues we collaborate with can be found in our Best Execution Policy Summary Click Here.
Leverage And Margin Binary Options are not traded on a margin. This means that the trader cannot open a position that is larger than the funds he has in his account and therefore cannot lose more than the initial investment.
Binary Option Products Binary Options can be traded as Call or Put positions depending on where the investor deems that the price of the underlying asset will move up or down. The expiry period can be as short as 30 seconds and up to 6 months. Other types of Binary Option types are provided also by Yardoption such as “High/Low”, “Above/Below”, “Short Term”, “One Touch” and “Boundary”.
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