# What Are Binary Options?

Binary options are exotic options which were typically available on OTC markets. But now, thanks to the information age, even a day trader or a private investor can trade these products. Before you go ahead and read this blog, a word of caution regarding the trading of these binary options. The Binary Options are not legal in India, but they are extensively traded in the UK, and are largely seen as something close to gambling by the rest of the trading fraternity. Binary options are not regulated by any exchange or government and carry a lot of risks.

Now coming back to the actual trading part, as the name suggests it is binary in nature, that is, binary options always provide two choices to the trader and pose a singular unique question. The question posed by each of them is different, and if you understand what that is then you will be able to trade it easily.

If you can answer the question with a certain degree of confidence, then you have the eligibility to trade these exotics. Like the normal put and call options are known as vanilla, as in ice cream flavors, we have many exotic flavors available in options too. I have listed a few that are supported by trading platforms currently.

### Types of Binary Options

#### High/Low Binary Option

This is a very simple binary option. All you need to do is predict if the market will go higher or lower by the time of expiry. And the time of expiry is usually your choice, that is, you can choose the expiry from a range of 30 seconds to a few days. I will explain this in detail with an example.

### Learn Algorithmic trading from Experienced Market Practitioners

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### Trading Strategies Using Binary Options

#### Speculating with No-Touch

In this strategy, we take advantage of the high returns on the Touch option. Usually, the average returns on a touch/ no-touch option are more than 100%, so we can buy both Put and Call at the same time and even if we get one of them correct, we will end up making money. I will explain this with an example. Let us say that the market is low volatile and not much of news is expected, so we go for a no-touch ( only if the payout is much more than 100%, should include your transaction as well) then we sell no touch for the next 5 minutes at a price that is not too far away. If the price is too far away your returns will also diminish. Alternately, you can try trading an uneven range. In this, let us say the stock is trading at 100 and you buy a no touch on 102 for the next 2 minutes, and you buy another no touch for 99 for next 2 minutes. So, the payout of the second binary option would be more than the first one. This is something you can execute if your view is bullish for next 2 minutes. This strategy is called a straddle.

For people who are familiar with Candlesticks patterns, know “The Hammer” very well, it is generally seen as a trend reversal signal. I have executed a simple strategy using the hammer. For those of you who do not know the hammer, it is a pattern that likes this:

Using this pattern, I bought a no touch below the hammer’s low, I thought it was a safe stop. Post execution the trade returns seemed to be low, 7.4% as the barrier price or the no touch price is very far away compared to the market price. I have used a 2 minute expiry, so the payout is really low.

Luckily for me, the market moved up and I picked up the 7.4% in 2 minutes. For people who want to learn and experiment on such strategies, try the virtual account.

The best part of this entire binary options trading is you can exit your position at any point you feel you have a decent profit. Just click on the sell at market option and pocket the profit.

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## 2 thoughts on “What Are Binary Options?”

1. February 4, 2018

I normally really like your articles, but by promoting binary options you disqualified yourself. Binary options is SCAM, there is no profitable trading, the only winner is the broker and promoters like you who get a piece of the cake.

What’s next promoting a martingale strategy to “beat” roulette?

• February 5, 2018