People invest their time and money both on several types of investments in their life time. They are different types of policies, life insurance, stock exchange, real estate, gold, etc. All these types of investments are made with the idea that they will get bigger returns in a few years or it will help them to move on with their lives even if bad times have arrived. However, there is one problem that has persisted that is the ignorance of common people towards these money making systems. Most people make investments without fully understanding the risks and payoff. Thus often the common people find themselves to have made bad choices altogether. There are several quick gain investments but in order to deal with them proper knowledge is required or else the person can lose almost or whole of the amount invested.
In the market one type of payoff is rather famous – binary options. Binary option is a type where payoff has only two outcomes – either there is a gain of some fixed amount of money of some property or there is no gain at all as everything is lost. Thus the trader has to correctly wager on the direction of the market. If the price during expiry is on the right side of the strike price then a fixed return is paid to him/ her regardless of anything else. But if the estimate is incorrect, then the whole investment is lost. People might be wandering what strike price is right now. Strike price is the price with which people and companies can exercise a specific derived contract. It also has an expiry date and time.
There are two major types of binary option –
• Cash or nothing option- In this option a fixed amount of cash is paid if the option expires and the price is on the proper side of the strike price during expiry and if not the whole of the money is lost by the trader.
• Asset or nothing option- In this option the value of the underlain security is paid to the trader if he/ she have made the correct choice.
In binary options, the potential return in lieu of an investment is known from the very beginning. They can be bought on almost any financial product and is always offered against a fixed expiry date. With the advanced technology present for the human beings, all the transactions are carried out through computers these days. The risk and knowledge required in this type of a trade is quite high, so if a person is not good at this kind of marketing then he/ she should hire a stock broker who is well acknowledged with these kinds of financial products.
There are many different arenas present for the interpretation of prices such as, in the prediction market for finding the estimate of an event occurring in the country which depends on the population, in the financial market binary option can reveal more information on expected returns and there are also other theories as to how it can help to shape the financial market.