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Binary options depend on the outcome of a "yes or no" proposition, hence the name "binary. At the time of expiry, the price of the underlying asset must be on the correct side of the strike price based on the trade taken for the trader to make a profit.
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Regulation and fraud[ edit ] Further information: Securities fraud Many binary option "brokers" have been exposed as fraudulent operations. Manipulation of price data to cause customers to lose is common. Withdrawals are regularly stalled or refused by such operations; if a client has good reason to expect a payment, the operator will simply stop taking their phone calls.
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As you can see from the calculations above, the risk you take is limited to the premium paid on the option. You cannot lose more than your stake.
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What is the Best Binary Options Broker? Binary options trading hinges on a simple question — will the underlying asset be above or below a certain price at a specified time?