Binary options are one of the most popular types of options that provide a fixed target or deadline for expiry of the instrument with a fixed payout.

It is more like a bet of – yes or no.

Primarily the bet is on a pre-determined price of the underlying asset in the market to check if it is at, below or above the strike rate, by the defined future period.

Those who follow market and financial news can easily make use of binary option type of trading to make money.

The major necessity of this type of trading is the knowledge on financial instruments and how the market is working.

Being able to predict and accordingly invest will help you get big money easily.

This is considered as a great option to start trading as it is an inexpensive and good way to learn about trading before being involved into buying commodities or stocks.

There are mainly two possible outcomes that can be expected from binary option trading– this is purely about trading on bet.

Betting is on the market movement to see the direction of market over the period of a month, week, daily, hourly or even on minute basis.

Speaking of expiry times, binary options usually have a short expiry time ranging from a minute to a few days.

The price at which you place a trade is known as the strike price.

So basically, if you wanted to place a trade, you’d have to first decide if you want to buy or sell the asset.

There are two options that allow you to do so.

A call option allows you to purchase the underlying asset.

If you expect the price of the underlying asset to remain above the strike price, you’d buy a call option.

On the other hand, you’d sell a put option if you expect the price of the underlying asset to be below the strike price by the time of expiry.

Let’s understand how binary options work with the help of an example.