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gandra
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Number of messages : 3632
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Date of Entry : 2013-01-13
Year : 47

Digital Options or fixed-return options " FRO "

on Fri Feb 06, 2015 7:10 pm

Concept
Binary options also called digital options or fixed-return options (FRO) are a simple way to trade price fluctuations in a wide range of financial markets. Binary options have different profits, costs, risks, liquidity structure and investment processes than the traditional (vanilla) options. The key distinguishing features of binaries are:


  •    Easy to trade – simple and straightforward to understand


  •    Predetermined payouts and risks – unlike a traditional vanilla option, the possible gain is binomial, predefined and works as “all-or-nothing”


  •    Payouts – In-the-money contracts yield returns starting from 70% of the paid premium/contract size up to 90%


  •    Variety of markets – the underlying instruments may be individual stocks, indices, Forex, commodities, etc.


  •    Small trading amounts, low deposit required – binary options contracts/premium with Dukascopy start from as low as USD 1


  •    No commissions – Dukascopy Europe IBS AS charges no fees in addition to the premium paid by the trader


  •    Numerous strike prices and expiry dates – for call/put binary options the strike price is the price at the start of the option contrac.


  • Binary options offer a non-linear return and a way to gain up to 90% of the initial investment/premium if the contract terminates In-the-money.


  • Entering in binary options is speculative and involves the risk of losing your entire investment. You should only trade money you can afford to lose entirely.
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