Binary options are a type of option instrument that provide a fixed deadline for expiration,whith a fixed payout.Basically,it is a yes or no bet.Specifically,the bet is on wherher a settled price of an underlying market will be at,above, or below a target strike barrier,by a defined future time.
For example,on a Monday morning,the trader is trying to answer the question:Will the S&P be at 1350 by Friday at 4 p.m.?If the trader aniticipated this outcome,and turned out to be right,the payoutoff using the North American Derivatives Exchange (Nadex) binary options would be $100 per unit.
If another index the S&P 500, for example–did not reach this level,the pay off would be zero dollars.If the trader is correct,the return can approach extraordinary levels of 500 percent and more for only five days of play.The binary option is called bianry because it fits the condition of being either right or wrong–all or nothing.
Binary option trading fits right into the digital era, which is based on binary logic.In fact, the binary options offered by Nadex can be considered to be part of a type of option classified as European Digital Options.Be that as it may, the inquiry emerges:Why are binary options important?
There are many reasons that ring a bell.Binary options are important,but not simply because they are relatively new trading instrument.In fact,they are not really new They have been used for decades at and losing streaks offset each other.In binary options trading, winning and losing streaks are not statistical outcome.
Binary Options Trading is a prime example of the value of actionable knowledge.The binary option trader is participating in an imperfect-information game,where it's never possible to have all the information necessary to win.
It clearly takes a level of knowledge to play this game well.We will explore what kind of fundamental and technical skills it takes to evolve as a binary option trader in greater in later chapters.