Binary options make excellent financial instruments, but only for those familiar with their possibilities. There are different types of binary options with different properties, and all financial experts and those who aspire to join their ranks should be proficient at all aspects of modern financial markets. Other articles will provide a more focused, in-depth analysis on each individual type, but for now the brief introduction is sufficient.
High-low or fixed return types of binary options
As with any type of binary options, fixed return binary options have you betting on whether the price of a financial instrument will be higher or lower than what it was when the option was acquired. Upon expiring, the binary option will be either in the money, or out of the money; the first outcome nets you a 100 dollar profit, while the second one gets you a big, fat, zero – in other words, you get nothing. Since you are merely betting on a price change and not actually owning the financial instrument it concerns, you can place any number of bets and never have to worry about liquidity. Unless you are operating on an unregulated market or exchange, in which case you are on your own – sure, the profit margin may seem greater, but there is no guarantee that you will ever successfully collect your earnings. You might want to stick to the regulated exchanges for the time being. One of telltale signs that the offer is legitimate is the fact that it displays in advance things like strike price, risk assessment, dates and other details concerning binary options you are about to acquire – the key word is ‘transparency’.
Anyway, all types of binary options come with a strike price and an expiry date. You win if the price upon expiration is higher (or lower, if that is what you chose to bet on) than the strike price. If you made the right call, the strike price on the expiry date will back you up, and you get paid a fixed return on your binary option – hence the name: fixed return binary options. They usually involve exchange fees or some kind of compensation for the broker (that is obviously honest, transparent and reliable), but this need not concern you, as long as your positions are reliable and predictions true.
One touch binary options
One touch binary options offer payout if the price matches the strike price at any point before the option has expired. This target price can be either above or below the current price, and the payout reflects the possibility of the outcome you bet on.
Range binary options
As their name suggests, range binary options have you determine the range and as long as the price stays within it, the option is in the money. If it breaks out of range, you lose.
Otherwise, binary options are binary options – general rules apply. With small changes happening all the time, new types of binary options may be a single business day away. Who knows…