You must have heard of the term binary options if you have interest in market investments and sometimes have wondered how binary options work actually. So, here is a guide to understand it along with its working.
Binary options gain or profit is decided on the date of their expiration. If the options are under pre-decided limit, you gain the decided profit, otherwise you get nothing. These are easy to understand and trade. Binary options work based on two outcomes, so you can take either of the two options — buy or sell.
If you think that the price of the asset you are having an eye on is going to increase within the time limit, you can buy the asset. On the other hand, if you think it is going to be in the other direction, you can sell the asset. The profit or the amount that you get is based on the price of the asset on the date of expiry. So, the factors that are responsible for your profit or loss are the price of the asset in the future, the expiry time and the direction of the movement of the asset.
How binary options work is simple to understand as they are easy to handle in practice also. You can easily calculate your profits and losses so you can limit your risks to a great extent. This is the reason they are getting more popular in the United Kingdom.