Once the binary option has been purchased, the investor must wait until the expiry time to discover whether his prediction was correct. A correct binary option trade is known as being ‘in the money’ and an incorrect trade is known as being ‘out of the money’.
Hence, a CALL option which expires above its strike price is ‘in the money’ and one which expires below its strike price is ‘out of the money’. Conversely, a PUT option which expires below its strike price is ‘in the money’ and one which expires above its strike price is ‘out of the money’.
Now for the profits – the binary option’s return rate! ‘In the money’ options will receive the percentage payout offered when buying the option. This will change depending on the platform. On anyoption™ this is between 65-71%. As per their name – binary options – ‘out of the money’ trades should result in a loss of the investment. However some websites offer percent refunds for these trades; with anyoption™ offering an industry high 15% refund.
The simplicity of binary options means that a trader does not need in-depth knowledge or experience in the financial markets. Reading the papers and being aware of his surroundings can be enough to gain insight on the likely direction of assets and to bring about a successful and highly profitable binary option trade.