How to Understand Binary Options

A binary option, sometimes called a digital option, is a type of option in which the trader takes a yes or no position on the price of a stock or other asset, such as ETFs or currencies, and the resulting payoff is all or nothing. Because of this characteristic, binary options can be easier to understand and trade than traditional options.

Steps Edit

Method One of Three:

Understanding the Necessary Terms Edit

Method Two of Three:

Trading Binary Options Edit

Which is true of binary options?

Method Three of Three:

Understanding Costs and Where to Buy Edit

Why might you trade binary stocks through Nadex?

Community Q&A

Tips Edit

Warnings Edit

Related wikiHows Edit

Expert Review By:

This version of How to Understand Binary Options was reviewed by Michael R. Lewis on March 11, 2017.