Binary options are different from stocks, Professor’s Punts Review bonds and mutual funds; even so, they are quite simple to understand. Instead of investing in a particular company (i.e. Microsoft, Google, Facebook, Exxon Mobile, etc.) a person who invests in binary options is essentially betting on price fluctuations in the price of particular options. Those who bet correctly will win a predetermined sum of money; those who take the wrong position will lose their entire investment.
Binary option investors can bet that the value of a certain investment will either go up or down. What is more, they can also set a time range for the stock to reach a certain high or low; this time range could be as short as a single minute or as long as a full day or even an entire week. For instance, a binary options investor may look at a company stock that is currently valued at $20 per share and bet $100 that the price will rise to $20.50 or higher by the end of the day. If the investor is right, he or she will earn a predetermined sum of money. If the investor is wrong, he or she will lose the full $100 investment.
Gains and losses are not determined by how "right" or "wrong" an investor may be; this means that the investor will earn the same amount of money whether the stock in question is valued at $20.51 or $22.00. Conversely, an investor who bets wrongly will lose money regardless of whether the bet was off by a single cent or a few dollars. Binary options can be traded inside the United States or on an international level. Alternatively, some investors may opt to invest in both national and international options. International binary options are officially categorized as being "exotic options" by the United States Securities and Exchange Commission.
There are various types of U.S.-based and international binary options. Following is an overview of these various types and how they work. Digital options are the simplest and most popular form of binary options. They are frequently called up/down options or call/put options simply because an investor need only bet on whether the options will rise above or fall below the active trading price within a certain time period. This time period can be as short as fifteen minutes or as long as a whole day. At the end of the time period, an investor will receive an email stating the current price of the options in question.