Binary options have recently come to the forefront when they were listed in the Chicago Board of Options Exchange (CBOE) in July of 2008.  Prior to this time, binary of digital options were traded actively in the over the counter market by institutional investors and major investment banks.  So what are Binary Options?  Binary options or digital options are “all of nothing “options which give the investor a fixed payout if the criteria of the option are met.  This can mean that there is a specific cash payout, or even a specific amount of an underlying asset that is the payout from the option.    The CBOE lists binary options, on the S&P 500 index but have not branched out into binary options on the currency, commodity or individual equity markets.  Today there are many brokers and market makers who provide a safe and effective binary option platform for the retail investor and the professional traders.

What makes binary Options interesting is that the investor receives a fixed payout as a return based on whether the financial market is above or below a specific level at a specific time.    As opposed to a standard option, the option buyer can look for a specific payout based on a small move in a financial instrument.  When trading standard options, the market has to usually move a great deal for there to be a payout.  The structure set up for binary options creates a significant payout, with relatively small moves in the underlying market. 

The majority of the time, a binary option is priced at the current market and the investor will be able to receive a return on his/her investment purely based on the short term movement of the financial markets.    This market is relatively easy to understand, and once an investor trades binary instruments, they will quickly understand the benefits relative to other options markets.    An example of a binary Forex option trade is a follows. 

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