Binary options are also known as the fixed return options, as there are only two possible outcomes attached to them. It is basically a type of contract which grants the buyer a right to purchase the underlying asset at a predetermined price in a stipulated period of time. The item being traded is referred to as the underlying asset, which could include a variety of securities such s commodities (gold, silver, oil, etc.), currencies, stocks of listed companies on stock exchanges and stock indices. The price at which you will purchase or sell the underlying asset is called as the strike price.
While trading binary options, if you are expecting an increase in the value of the underlying asset being purchased at the end of the expiry period, then you will have to choose the call option. People opt for call option when they feel that the option price would be more than the current price of the option. Put option, on the other hand, is the exact opposite. In this case, a person will place a put option if he or she feels that the current price will remain on the higher side when compared to the option price. Binary options trading, therefore, happen to be one of the most flexible types of trades available today. As a trader, you can choose the asset, predict its trajectory and expiry period. Therefore, as an owner, you enjoy a lot of control over your security. The only thing remain uncertain is the price of the asset at the expiry.
When compared to other,binary options trading happen to be a lot different. When you are trading under other alternatives, you can possess the asset for as long as you desire. Binary options does not make you the owner of the purchased asset. In options trading, you simply enter into a contract as to whether the price of the asset would go up or down at the end of the period of expiry. Therefore, your profit or loss would solely depend on your prediction abilities.
If you possess this ability to accurately predict the price movements of the assets, then options trading could fetch you a lot of money. Having said that, these trading options are not devoid of risks, just like other trading alternatives. However, if you can bear the risks associated with it, you can expect to make much more profits than other trading instruments.