Binary options is form of trading where there are only and only two possible outcomes – either you lose a set amount of money or you make a set amount of profit. There is nothing in between. The concepts of huge trades or semi-profitable trades simply don’t exist. The name is derived from the mathematical numbers 1 and 0, which are known as binary numbers. 1 represents profit and 0 represents loss. There is nothing called 1.5 or 1.2 or 1.9. It has to be 1 or it has to be 0.
What makes binary options different from any other form of trading is that profit and loss ratios are predefined and acknowledged even before the actual trades are executed. Bottom line is that if you don’t like the ratios, simply don’t participate in the trades. The predefined profit-loss ratio is non-negotiable.
All or Nothing Options: Binary options come with two possible outcomes – win or lose. If you win, you win a fixed amount of money and you lose, you get nothing. It is because of this, binary options are also referred to as All or Nothing Options.
Digital Options: It is the same as binary options or All or Nothing options. Digital options is just a different name but is popularly used in Forex markets.
Fixed Return Options: Once again a different name for the same thing. More popular used in the American Stock Exchange, the Fixed Return Options (or FROs) get their name from the fact that returns or losses are fixed even before the trades are executed.
So in essence, binary options are often known with three different name – ‘All or Nothing Options’, ‘Digital Options’ or ‘Fixed Return Options’. Different brokers prefer to use different names but they all refer to the same thing.