The binary options (also called: Up-Down or Intraday) offer the opportunity for traders to invest in underlying assets such as currencies, commodities and indices if they believe they will go up (UP) or decrease (DOWN) in a given period of time (5 to 65 minutes).
The binary options (also called: Up-Down or Intraday) offer the opportunity for traders to invest in underlying assets such as currencies, commodities and indices if they believe they will go up (UP) or decrease (DOWN) in a given period of time (5 to 65 minutes).
The binary options are an investment system in which you bet on the rise or fall in the price of underlying assets that are quoted on a stock exchange for a certain time. There are two types of system, cash or nothing, in which an amount is earned if at the expiration of the option it quotes above what was paid (in-the-money) or nothing in the opposite case (out-the-money). The other system is active or nothing, in which you can earn the value of the price of the underlying asset.
The main characteristic of these products is that it is about predicting if the price of a good is going to rise or fall during a specific period and there are only two options, win or lose everything, hence the name of binary, and where the returns can reach large sums.
It is a high-risk mechanism due to its volatility and the amounts at stake, and where operations last for a very short time, sometimes up to a couple of minutes. Emulating a bidding system, and where the speed of management plays a fundamental role with respect to the rest of the agents.
In the same way, it is also important to choose a good trading and operations platform, which has the necessary quality to conveniently carry out operations.
When buying a binary option, the potential return it offers is known before making the purchase. Binary options can be bought on almost any financial product and can be bought in both trading directions, either by buying a "Call" / "Buy" or by buying a "Sell" / "Put" option. This means that an investor can go long or short on any financial product simply by purchasing a binary option. Binary options are offered against a fixed expiration time, which can be for example 60 seconds and a maximum of 30 minutes, one hour before or at the close of the trading day.
For example, the purchase of an option of the BBVA Bank is made when it is listed at 10 euros. If in the future at the expiration date the share is trading above the price at which we bought the asset, we will receive the benefit offered. If the shares are trading for below 10 euros, nothing is received.
Please note that this article is purely educational and this instrument is not a part of XTB’s offer.
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
