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There are several types of binary options but most of them can be classified as one of these two categories:
Cash or Nothing
Before you place your trade you will know exactly what return you will get, if your expectations are correct. This way you will always know how much you could get as a return on your investments and you will know the maximum loss you can make. It is a way of reducing risk whilst investing.
If your asset increases or decreases in value to at least the figure you have predicted then you will receive the agreed return (which includes your original funds), if not, you receive nothing.
Asset or Nothing
In contrast, this type of trade is directly associated with the movement of the asset and the price it ends up with. If you predict it will rise in price and it does, you will receive the agreed payout. For example, you purchase an option that says the share price of a specific asset will reach $20. If it actually reaches $30 you will get $30, if, however, it only reaches $19 you will get nothing.
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