The two main types of Binary Options are cash-or-nothing or asset-or-nothing where the payoff is either some fixed amount of some asset or nothing. Called all-or-nothing options or digital options in the Forex/interest rate markets or Fixed Return Options (FROs) on the American Stock Exchange, binary options are usually European-style options.
The terms used are ‘Call’ and ‘Put’ and the simple interpretation is ‘Call’ bets the value meets or exceeds the target and ‘Put’ bets the value misses the target.
For example: A trader who thinks that the price will close at or above 1.2500 at 3:00 p.m. can buy a ‘Call’ option on that outcome. A trader who thinks that the price will close at or below 1.2500 at 3:00 p.m. can buy a ‘Put’ option or sell the contract.
Binary options contracts have long been available and, since mid-2008, web-sites called ‘Binary Option Trading Platforms’ have been offering a simplified version of exchange-traded binary options.
OptionAffiliates makes it simple to trade Binary Options online using their Binary Options Trading Platforms.