The biggest difference between binary and regular options is in it’s function. In the past, binary options were called traditional/digital options, because they were part of a larger, more complex operation. In these operations the binary options are used as a hedge against risk.
The modern binary options are easily accessible to average investors. Binary options are now used as a hedge. Rather, they are seen as a viable and attractive alternative to investment.
Traditional options
Traditionally, an option was an offer to buy an asset at a later date. That date could be as short as a month or as long as years. Many options are still used in this way. An employment contract may have options over shares in the company at a certain price. If the stock is worth more than the price of the option when the option expires, the employer must exercise its option to buy company stock at a big discount.
Traditional options are still offered to the public. The principle is the same: to exercise the option or not exercising the option when the option expires. Exercise that option means purchasing the underlying asset. An option to buy dollars on a month means exactly that. You decide in a month whether to exercise the option or not.
Clearly, it is important how much you have earned the asset value to determine if it is worth exercising the option. The movement of assets must exceed the premium that the investor has any benefit at all. If the asset acquired is a minimum, it may be useful to exercise the option, but the benefit enjoyed by the investor will also be minimal.
Binary options
As mentioned earlier, in traditional settings, one minute gains in asset values resulting in a minute profit for the investor. This contrasts sharply with the benefit, in a successful operation binary options, of 60-81%, or more, for a tiny percentage of the active movement.
- In binary options, the active only needs to finish “in the money” for the trader receives full payment of percentage.
There are three basic binary options
- In the high binary options / low, the asset has to complete a tick in-the-money for full payment.
- In binary options range active only you need to finish within the designated range.
- In binary options touch / no-touch, active only need to touch once, if that’s how comercializaste option.
As you can see, in the binary options you do not buy the opportunity to buy the currently active at a later date. You buy the opportunity to make a profit depending on how the asset to move during the option period.
Besides, we have seen the benefits that traditional options can be extremely small. Gains and losses on binary options are fixed, so a cautious interpretation of trends in the value of an asset, either short term or long term, can bring great benefits to the binary options trader.
Like traditional options, binary options are also traded in monthly increments; but they are most commonly marketed in increments of fifteen minutes to an hour.
Final conclusion
Both traditional options and binary options have a place in the vibrant world of finance or commodities. The prices we pay for many of the things we buy, from pork, gasoline, clothing, foreign exchange and many other things, are determined by the traditional choices.
Binary options allow the average investor, who has time to study, make trades with much less knowledge with initial financial risk.