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Binary options or “binaries” let you easily speculate on financial markets with limited downside risk no matter whether you are buying or selling them. The buyer of a binary option generally pays a fixed price or premium up front to possibly receive a fixed payout if their view turns out to be correct within the lifetime of the binary option.
While the binary options seller receives the premium, they may have to pay out a fixed sum to the holder of the option if the binary is exercised. Most retail traders are just permitted to purchase binaries.
A variety of binary options exist, although the most common and simple options of this type are known as “up” or “call” binaries generally bought to take a bullish view on the underlying market and “down” or “put” binaries purchased to take a bearish view. Your view will need to pan out within the lifetime of the binary option, or it may expire worthless.
Some binaries allow you to select 2 strike prices and are known as “range,” “boundary” or “tunnel” binaries. Say you think the market will move notably within a given time frame, then you might buy an “out range” binary that provides a payout if the market moves outside the range you specified. Alternatively, if you think the market will remain stable, then you can buy an “in range” binary bounded by a specified range.
Other variants of the binary option are one-touch and double-touch binary options. These options either payout or cease to exist as soon as the market touches either 1 or 2 preestablished trigger points respectively.
Since binaries are derivative financial instruments typically used for short-term speculation rather than for long-term asset appreciation, they tend to suit traders more than investors. Read on for more information about how to get started trading binaries at
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