Binary Option

Filed Under » , ,
Dictionary Says

Definition of 'Binary Option'

A type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money.

These types of options are different from plain vanilla options
 
Also sometimes referred to as "all-or-nothing options" or "digital options".
Investopedia Says

Investopedia explains 'Binary Option'

For example, suppose you were interested in buying binary call options for common shares of ABC company with a strike price of $50 per share and a specified binary payoff of $500. If the stock is trading above $50 when the expiration date is reached, you would receive the $500 payoff for your option contract. However, if the stock is trading below $50 per share at the expiration date, you receive nothing.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Cash-or-Nothing Put

    An exotic option ...

  2. Cash-Or-Nothing Call

    An exotic option ...

  3. Asset-Or-Nothing Call Option

    A derivative ...

  4. Asset-or-Nothing Put Option

    An option payoff ...

  5. Vanilla Option

    A financial ...

  6. Expiration Date

    The last day ...

  7. Strike Price

    The price at ...

  8. In The Money

    1. For a call ...

  9. Out Of The Money - OTM

    A call option ...

  10. At The Money

    A situation ...

Articles Of Interest

  1. The Benefits And Value Of Stock Options

    The pros and cons of corporate stock options have been debated since the incentive was created. Learn more about stock option basics and the cost of stock options.

  2. What You Need to Know About Binary Options

    Binary or digital options are a simple way to trade price fluctuations in multiple global markets.

  3. The 4 Advantages of Options

    Flexible and cost efficient, options are more popular than ever. Find out why.

  4. What happens to my call options if the underlying company is bought out?

  5. Retirement Savings Tips For 35- To 44-Year-Olds

    Learn how the "sandwich generation" can save for retirement while taking care of their kids and parents.

  6. Derivatives 101

    Learn how to use this type of investment as an alternative way to participate in the market.

  7. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.

  8. Finding Your Investing Comfort Zone

    Choosing the right investments for you is the best way to feel comfortable with your portfolio.

  9. Investors: Rely On Your Gut

    Find out how your personality and natural instincts can direct your investment choices.

  10. Simplify Your Portfolio

    Faced with an overabundance of choices, many investors forget to stick to the basics.
Sponsored links

comments powered by Disqus
Hot Definitions

  1. Love Money

  2. Shark Watcher

  3. Judo Business Strategy

  4. Dogs Of The Dow

  5. Chinese Hedge

  6. X-Mark Signature

Recommended
Loading, please wait...
See More »
Trading Center