A binary option is a type of option in which the trader is predicting whether an asset, such as a currency or a stock, will increase or decrease in value. In most types of financial trading, investors instead have to predict the actual future value of any given asset in order to make a substantial amount of money. Binary options have a specified time frame and a predetermined payout. At the end of that frame, the trader receives the payout if they have correctly predicted how the value would change, regardless of how much it changed.
Binary options are called this because there are only two possible options: the asset increases in value or decreases. The effect on the trader’s bottom line is also binary, or having two possible options: either they win and get a payout, or they lose and do not get a payout. There are only two possibilities to trade on and only two possible outcomes, which makes this a very easy form of trading for new and casual traders. However, many experienced and even professional traders also enjoy binary options trading do to its fast pace and high potential reward.
Binary options trading is as old and established as other forms of trading, but it has only recently become popular among modern traders. The internet has made it easy for casual traders to learn about this form of trading and to manage an account. In addition, the popularity of this form of trading has soared because it is easier to understand and manage than other forms of trading. Another important factor is that binary options trading is very accessible to new traders because of the relatively small amount of money needed to purchase an option.
