Web Trader MT5
A type of derivative with a fixed, all-or-nothing payoff. The buyer wins a predetermined amount if a specific condition is met by expiry; usually whether the underlying is above or below a strike price; and loses the entire premium if it isn’t. Simpler than vanilla options, but in exchange the payoff structure removes most of the nuance that makes options useful as hedging tools.
Binary options earned a particularly bad reputation through the 2010s as a vehicle for retail fraud. Offshore platforms targeted unsophisticated traders with promises of easy profits, manipulated prices, refused withdrawals, and operated outside meaningful regulation. The UK’s FCA, the EU’s ESMA, and Australia’s ASIC eventually banned binary options for retail clients in their jurisdictions. They’re still legal in some markets and can be traded responsibly by professionals on regulated venues.
Example: A binary option might pay $100 if the S&P 500 closes above 5,500 on Friday and zero if it doesn’t. The buyer pays a premium of, say, $40 for that contract. Either they collect $100 or they lose $40. No gradient, no partial credit.
