What are binary options and how do you get paid for them?

Binary options are a type of financial instrument on the Polish market. It consists in speculating whether a given currency, e.g. EUR, will strengthen (Call) against the USD or fall (Put). You do not have to specify to what level the rate will reach on the chart. You just need to predict whether the price will rise or fall within a predetermined period of time. Investments through binary options are well known to stock market investors, and recently they have been available to everyone without leaving home. The development of technology has made it possible for everyone to try to multiply their money by predicting the direction in which the price of a given asset will follow. Simple rules, possible profit and investment time known in advance. It is often investors operating in the forex markets who also take up the topic of binary options. Both issues are actually very closely related to each other. As in the forex market and in the case of binary options, investments are based on the value of given financial instruments, mainly currency pairs.

Binary options or forex?
What is the difference between binary options and forex? Time is key. A binary option has a predetermined maturity. At the time of purchasing an option, we know the exact time when it will expire, and our task is to decide whether at the time of expiry the price of a given asset will be above or below the current price at the time of option execution, i.e. the strike price. If our decision turns out to be correct and the rate at maturity is in line with our expectations, the given option is the winning option for us, so "in the money" and we earn.

How much do we earn? It depends, among other things, on what financial instrument and the type of option we choose. You can also read about the types of binary options, also known as digital options, on our website. Usually in the case of the so-called European profit on options "in the money" is between 60% and 75%. What distinguishes binary options from investing in forex is, among other things, that in the case of options, we are not interested in how much the price fluctuates. The only thing that matters to us is whether the price is above or below the strike price at maturity.

In the case of the Forex market, the dynamics of exchange rate changes is the most important. If it is large and its direction is consistent with the positions we take - we earn. In the case of binary options, it is enough for the price to change by 1 pip and we can get a very attractive rate of return. Another difference is the potential losses. In the case of binary options, we know at the beginning how much we can lose 5, 10, 50, 100 or more dollars, depending on how much we decide to buy the option for. In the forex market, with poor capital management and not securing open positions, e.g. with STOP LOSS orders, which often happens to beginners, hungry for quick and large profits, investors can even lose all their capital in extreme cases.

Find more information here: Binary Options Brokers Tested