I have been hearing lately a lot of talk about binary options and thought it would be a good idea to do a little research on how binary options work. Binary options came into existence around 2008, retail traders seem to have taken great interest in utilizing these financial instruments to manage risk. Binary options are looked at as very exotic derivatives by most of the established financial authorities. Traditional options which can be very complicated to understand, binary options are extremely simple . There are only two possible outcomes, in-the-money or out-of-the-money. The profits that investors get when binary options expire in the money is fixed. If the option expires out of the money, the investor only loses what he paid for the binary option. Because the risk and return are known, it is now easy to manage risk with binary options. I have not used binary options my self, but from what I have read so for, it may be a very interesting twist on traditional risk management.
