Binary options are structured around a simple “yes or no” outcome. The trader chooses whether the price of an asset will be above or below a specific level at a certain time. If the prediction is correct, the option pays a fixed amount. If the prediction is wrong, the trader loses the amount they invested in the contract.
These options usually have short expirations—minutes, hours, or a single day. Because they are straightforward and have limited risk, binary options attract traders looking for quick, clear outcomes. However, they also carry risks due to time pressure and fast price moves.
Binary options are offered on various underlying assets, such as stock indexes, currency pairs, commodities, and cryptocurrencies. Regulation varies by country; in some regions, binary options are tightly regulated due to concerns about misuse or unfair platforms. Traders should always use regulated exchanges or platforms that offer transparent reporting and fair settlement.
Binary options give traders a simple way to speculate on price direction with fixed risk. They require fewer decisions than traditional options but still allow exposure to short-term market movements.
At expiration, the contract settles based on whether the event happened. If the asset meets the condition—such as closing above a specific price—the trader receives the full payout. If not, the contract settles at zero. Because the outcome is all-or-nothing, traders must be confident in both direction and timing.
Binary options settle quickly, and price movements near expiration can change rapidly. The short timelines make predictions harder, increasing the chance of losses. Many unregulated platforms have also caused problems in the past, so traders must use trustworthy, regulated venues to ensure fair execution and proper settlement.
Traditional options offer flexible outcomes, including partial gains or losses, depending on how far the price moves. Binary options have only two possible results: full payout or zero. Traditional options allow more strategies and adjustments, while binary options focus on a simple yes/no prediction with a fixed payoff.
A trader buys a binary option predicting that gold will close above $2,000 today. If gold ends the day above that level, the trader receives the predetermined payout. If the price stays below $2,000, the trader loses the cost of the contract.
FinFeedAPI’s Prediction Market API supports binary-style event data, allowing platforms to track outcomes, analyze probabilities, and compare settlement results for event-based and binary-style trading models.
