Binary Option Formula

Binary Options Trading is as easy as predicting if a flip coin is up or down…

Of course this is equally dangerous and will lean towards gambling if you don’t possess the proper knowledge and tools allowing you to get the odds in your favour”

Binary Options, known also as Digital Options or All-or- Nothing Options are not new financial instruments, but thanks to the new technologies, these are now available to the public and present an easier and faster way to make money.

The Digital option term derives from the digital nature of elec tronic devic es whic h have only two states of being, “on” or “off” as with digital options trading.

When you hold a digital option, you are either in an ―On state indication which means you are in the money or in an ―Off state implying you are out of the money.

The value of the payout (Some brokers offer up To 85% return) is determined at the onset of the
contract and does not depend on the magnitude by which the price of the underlying asset moves, so whether you are in the money by $0.01 or $0.05, the payout that you receive will be the same.
Binary Options are sometimes called all-or- nothing trades, meaning that either you are In- The- Money (ITM) and you get the specified payout, or you are Out-of-the-Money (OTM) and you lose your traded amount.

Binary options trading are a fast and exciting way to trade the financial markets . The payout rate trading digital options is high in comparison to any other traditional financial trading.

A simple Example for a digital options trading:
A trader wants to trade the NASDAQ so he buys 100$ Contract of a Call Binary Options that carries an 81% Payout rate.
The NASDAQ now is traded at 2686 points and the time is 14:00 at N.Y, t he Call Binary Options expires at 15:00.

If the trader prediction was right, it means that the expiration price of the binary options at 15:00 will be one pip or more than 2686 points; In this case the trader will gain 81% return on his investment, so with a Contract amount of 100$ his profit will be 81$, returning 181$ in his trading ac c ount. That is a 181% ROI.

If the trader’s prediction was wrong, he will lose the 100$ that he traded.

From the buyer’s perspec tive, the main advantage of binary options trading is that the Risk taken is limited to the premium that the trader pays up front to take on a binary option position. So in above example, the Risk taken by the trader is limited to $100 in that partic ular position.

This benefit means that the binary options trader can feel secure in knowing that their downside is limited to their initial trade size. While they can still profit if their market view turns out to be correct, they avoid having to worry about stop loss order slippage or losing their trading discipline.

Furthermore, binary options are a simpler trading vehicle having a limited risk profile since they either pay off a fixed amount or they do not, depending on where the underlying instrument is trading at the binary option’s expiration.

Another advantage is that binaries can often be traded for shorter time frames (1 hour, ½ hour or even 15 min) via binary options trading platforms then are typic ally available for normal options offered by exc
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