Binary options are simple trading instruments which generally pay either a high, fixed return or nothing at all. Hence the "binary". There can be only two possible outcomes to a trade: win or lose. For these reasons binary (or digital) options are also often referred to as "all-or-nothing" options. And this is mostly an accurate description of the situation but doesn't quite tell the whole story. But first a little more on binary options.
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Binary options, like traditional options, are available on a variety of underlying assets. With stocks, indices, commodities and currencies being the most popular assets on which to base trades. However, unlike traditional options binary options pay out a fixed, known return which isn't dependent at all on how far "in-the-money" the option is. If the asset you placed a call option order on is higher then the strike price by so much as one pip/tick then you are paid out the same high returns as if it finished in the money by 100 points.
